Monthly Archives: July, 2012

Q. I am a FERS employee who has 12 years before I can retire. I have already invested $4,000 in a Roth IRA for 2012 and switched all of my Thrift Savings Plan contributions to the Roth option in May. My financial adviser said I could not invest more than a total of $5,000 in both Roth accounts for 2012 and told me to switch my contributions back to the traditional TSP. Is he correct, or can I invest the $4,000 in the Roth IRA and $17,000 in the Roth TSP? In other words, can I still invest the annual…

Q. I have a rollover IRA with Fidelity with approximately $75,000 at current market rates. I am wondering if it is better to transfer this money to my Thrift Savings Plan or leave it where it is? I have eight years until I retire at age 66. What do you recommend? A. Since the TSP offers expected investment performance superior to what you’ll find anywhere else, I recommend that you transfer as much of your portfolio as possible into the TSP and keep it there for as long as possible.

Q. I am 61½ years old. I want to pay my mortgage off. I am losing my contract job and need to lower my debt.   I have saved up all but $30,000. If I withdraw that from my Thrift Savings Plan, how much in federal taxes will I have to pay? Would it be better to get a personal loan? A. Your TSP withdrawal will be added to your income for the year and taxed at your marginal tax rate for the year. You’ll need to prepare a pro-forma tax return to estimate the amount you’ll owe. It’s impossible to say,…

Q. I will be taking voluntary early retirement July 31. I have plans to take my money out of TSP to pay off bills and buy a home. Would it be better to wait until next year to pull out since I will be in a lower tax bracket? A. While it’s nice to reduce the tax liability on your withdrawals, the size of any advantage you’ll enjoy from waiting will depend on how much income is ultimately exposed to lower tax rates. Once the potential tax benefit from delaying the withdrawal is determined, it needs to be weighed against…

Q. I am 59 years old and will have 38 years civil service (FERS) in October. I hope to work until age 62. We went to a financial adviser when my husband retired two years ago, and he invested his 403 in an insurance fund and another fund recommended by this adviser. It has earned around 5 percent. The adviser now wants me to withdraw most of my Thrift Savings Plan at 59½ and invest with him. I know 5 percent is pretty good, but it will be locked in for several years. He also recommended I purchase whole life instead of…

Q. Can I roll over the balance of my Thrift Savings Plan loan to an IRA at retirement and keep making loan payments? I am trying to delay the impact of the entire balance being counted as income on my 2012 income tax (assuming I am retiring in August 2012). A. No. Loans are not permitted from an IRA.