Q. I am a FERS employee who did a one-year-and-one-day residency (366 days) at the Veterans Affairs Department. During this residency, I was a full-time (40-hour-a-week) employee receiving benefits (health care, annual leave, sick leave, etc.). However, I did not contribute to FERS or the Thrift Savings Plan during this year and my “term” of employment was allotted for only one year. After the residency, I was hired as a full-time employee at VA contributing to the FERS pension, and I still continue to work in the VA system. 1. Does this one year of residency count as a year of…
Monthly Archives: May, 2012
Q. In a May 6 column, you recommended moving my traditional IRA to my Thrift Savings Plan. Why? I am getting good performance from my traditional IRA portfolio. I am planning to retire between the end of this calendar year and the end of 2013. Tax rates are likely to increase next year. What will be my tax consequences of making this move this year versus next year? What are the consequences of waiting until after I retire to make this move? A. The cost of investing is lower in the TSP, so the expected rates of return are higher than…
Q. If I contribute to the new TSP Roth, would I still receive the agency matching contributions? A. Yes, but the agency contributions go into your tax-deferred account.
Q. As a federal law enforcement officer facing mandatory retirement in 2013, I have been looking closely at my Thrift Savings Plan withdrawal options. When I retire and I leave my complete TSP balance in the G Fund, can I request withdrawals whenever I want and for whatever amount I want? I see that there are options for setting up a recurring amount each month or year, but can that be changed to month to month or whenever it is needed? For example, because receiving my full retirement pension amount in a timely manner will most assuredly not happen, would…
Q. Three years ago, I let myself be persuaded to withdraw 50 percent of my Thrift Savings Plan and place it in a private qualified retirement account. I did this at age 61, and this was my one-time withdrawal, so there were no penalties. I regret doing this. Before I retire, can I transfer this money back into my TSP without any issues? The other option is to use this private account to purchase a fixed annuity and draw off of it during the first years of my retirement thus leaving the other half of my savings (in Thrift) alone…
Q. You made the following statement in a recent column on common mistakes regarding retirement: “Think paying off your mortgage in retirement is important in achieving the highest standard of living possible? It’s probably not.” Why? I’ve always thought the opposite — that you should have your mortgage paid before you retire. Can you share your thoughts on this subject? A. You’ll find a transcript of a column I wrote on the subject here: http://www.variplan.com/uploadedDocuments/1277733522Carrying_mortgage_into_retirement_can_pay_off.pdf. Basically, the reason is that paying off your mortgage can tie up funds that you may need later to pay your bills — the bills for your…
Q. I’m preparing to retire and trying to learn about TSP options and the outside world with investing my life savings. I have most of the outside world telling me to pull it out now — I’m 61 — because the G Fund is not even keeping up with inflation. I also have looked into investing some of it in a program called Diversified Stock Income Plan with Wells Fargo. Under $200,000 will cost me 1.5 percent every year if I invest in this program. What do the experts say about the advice I am getting? A. This expert says:…
Q. I am considering a Thrift Savings Plan loan of $40,000 to fully fund a Roth TSP for the next few years. I am in the Air Force and plan on staying in the service for at least six more years until retirement. I’m just not sure that the benefits of a fully funded Roth TSP will outweigh the tax I will pay on the loan payments, not to mention the tax I will pay on the interest from the $40,000 as it sits in the bank waiting to be deposited into my Roth TSP, and the gains that $40,000…
Q. I invest the maximum in my Thrift Savings Plan L2030 account. What other monies can I move into my TSP account — e.g., mature CDs, ITF money from a deceased parent, bond dividends, etc.? A. You may transfer previously untaxed retirement account (IRA, 401(k), 403(b), etc.) balances into the TSP.
Q. I am planning to retire in December 2013 with 41 years of government service. I am covered by CSRS and have been participating in the Thrift Savings Plan. I have several small IRAs for which I am charged $40 a year. I was going to switch this money over to a building and loan association that advertises it does not charge an annual fee. Would I be better to put these funds in my TSP? Would that result in a taxable event? A. Generally, the TSP should be your first choice for retirement investment. Transferring your IRA accounts to your…