Q. I am separated from federal service, and I want to roll my Thrift Savings Plan funds over into two or three separate IRAs at one or more brokerage houses. Am I allowed to make two or three partial withdrawals and roll each portion into separate IRAs? Are there time restrictions such as only being permitted to make one such transfer in a 12-month period? A. You are not allowed to take multiple partial withdrawals from your TSP account. You may roll the money over to an IRA and then roll over partial withdrawals from there to additional IRA accounts.
Monthly Archives: June, 2012
Q. I’ve worked for the Postal Service since 2001. There is $29,000 in my Thrift Savings Plan. I was on the 3 fund for all of those years. I would like to make some changes hoping to bring in more. I am 37 years old. I just changed it to 30 percent S and 70 percent G, but I am sure that is not good. Could you assist me? A. Why did you choose this inefficient allocation? If you’re not sure which allocation best suits your needs, try the L Fund with the maturity that most closely matches your life…
Q. Can a wife roll over her 401(k) distribution into her husband’s Thrift Savings Plan account? A. No.
What will you do if Congress raises the amount you must contribute to your pension? That’s a question that many of you should be prepared to answer — just in case. In the current environment, every federal employee should be considering the most likely threats to his or her financial plan. One threat that should be on your radar is a bill the House passed May 10 to raise employees’ pension contributions by 5 percent of their pay. I thought I’d take a stab at quantifying the impact of this bill on an individual employee. I considered a hypothetical employee,…
Q. My husband retired from 36 years of federal service on June 2. He is in CSRS. We hope he will begin receiving his check within a month or two. Given that he retired halfway through the year, and given that his initial checks will be only 60 percent to 70 percent of what is due, we anticipate that he could get the money owed for those first months in a lump sum in the next tax year. This could be a sizable sum and could have significant tax consequences. It also makes it hard to plan for the correct amount…
Q. I plan to retire next month at age 62 and withdraw my entire Thrift Savings Plan account. I know that they will withhold 20 percent for federal taxes, but how can I keep from being taxed on that amount as income in the same calendar year? With my current rate of pay, adding some $300,000 to $400,000 in the TSP withdrawal will surely kill me in taxes. A. Assuming that you are determined to withdraw your entire account balance at once (why would you do this?), you can roll over part of your withdrawal to an IRA.
Q. I have a Thrift Savings Plan loan and I am retiring. I’m reading everywhere and understand that I must pay back the loan to avoid a taxable distribution. What is the time frame for that? Your reply to someone last year was, “Your loan balance will be automatically declared a taxable distribution if you fail to repay it after you retire.” But is there is time frame after I retire? Does it have to be paid by the day I separate, or can it be paid a few weeks after my official date of retirement? A. You will have…
Q. I am 61 and plan to retire at the end of this year. I have about $60,000 in the Thrift Savings Plan. Should I withdraw this year or next for a better tax benefit? A. It’s impossible for me to say, since this will depend upon your tax returns and the tax code for this year and next. In general, however, I recommend that you leave your money in the TSP for as long as possible.
Q. I retired under the provisions provided for federal law enforcement officers at age 52 (I’m now 58) under CSRS and am confused concerning under what circumstances and when I can withdrawal my entire Thrift Savings Plan balance without paying a 10 percent tax penalty. It’s my understanding, after reviewing the information in the TSP book, that after age 55, you can begin making withdrawals from your TSP either as a monthly paid annuity based on life expectancy or monthly installment payments but that the 10 percent penalty will apply if I withdraw the balance lump sum if done before…
Q. I have received several inquiries about establishing Voluntary Contribution Plan accounts with the Office of Personnel Management, funding the account and then rolling those voluntary contributions into a conventional Roth plan administered in the private sector once the employee has retired. I am a little skeptical about the prudence of this. It appears to me on the outside that this is simply a way of talking people into using the federal government to change the “color of money; read: launder” and then roll it into a Roth where a plan administrator will now make a fee on your hard-earned…