Q. Can I make a voluntary contribution and roll it over to a Roth IRA as a retiree? Am I correct that this would have to have been done before retirement? I took a voluntary early pension in 2004 at age 50. A. You are correct in that you may not make a VC after you retire.
Monthly Archives: January, 2013
Q. If I cash out my Thrift Savings Plan now that I am retired, will that income disqualify me from getting the retirement supplement? I am 61 years old and had 27 years in. A. No.
Q. We plan to retire from Washington, D.C., this year and currently live in Virginia. When we retire, we will immediately relocate to Nevada. Do we have to pay Virginia state tax on our annual leave check? A. This is a question for a CPA.
Q. I am a single FERS employee. In 2012 and prior years, I have been able to contribute the maximum amount to my Thrift Savings Plan account to bring my adjustable gross income below the income phase-out limit to be able to contribute the maximum to a Roth IRA. However, in 2013, I believe my AGI will exceed the limit and I would like to take advantage of the Roth TSP option. If I contribute the maximum $17,500 to the Roth TSP, can I still invest in a traditional IRA? If so, can I take the IRA deduction even though I make…
Q. I will retire soon and have access to a nice sum of cash that I want to invest. Does it make sense to use the Voluntary Contributions Program to a Roth vehicle to invest all or part of this money? A. Yes, as long as you can put the money away in the Roth for the required holding period.
Q. I will be retiring this year after 21 years in the Air Force. I have $20,000 in the Thrift Savings Plan and was wondering if it would be better to roll it over into an IRA or pay off all of my credit debt. How big of a hit would I take for withdrawing my TSP early? A. It’s impossible to say which is better without some careful planning and analysis. If you trigger the early withdrawal penalty on a TSP distribution, you’ll pay 10 percent of the earnings distributed.
Q. I recently asked to withdraw my Thrift Savings Plan account. I understand that they automatically withhold 20 percent of the balance. I live in Pennsylvania and was wondering if I will have to pay more taxes even though TSP withheld the legal limit of the 20 percent. I am trying to figure out if I should be expecting a bill from the Internal Revenue Service once I file my taxes for 2012. Maybe I’m overthinking this, but I’m trying to buy my first house and heard rumors that the money can be used for this without penalty. A. The 20 percent withholding…
Q. I am taking the Postal Service Voluntary Early Retirement Authority on Jan. 31. I’ll be 56 then. I’d like to take a full withdrawal from my Thrift Savings Plan in monthly payments and then possibly roll the balance into an IRA at age 59½. I understand that 20 percent will be withheld automatically from my monthly payments for taxes. If I withdraw the balance a few years later, will the 20 percent figure still apply, or can I roll it into the IRA without the tax hit?
Q. I am a federal forestry tech (firefighter) and am facing mandatory retirement in 1½ years. I am wondering if the fiscal cliff will affect the Thrift Savings Plan like a couple years ago and the bottom will fall out. If so, would it be prudent to move my TSP more to more conservative accounts? A. No one knows what the future holds, but market timing only adds unnecessary risk to your investment strategy. Select and implement the asset allocation scheme that supports your goals with the minimum of risk and stick to it. That’s the safest bet.
Q. I will be retiring the end of this month and would like to know if I will have to pay Massachusetts state taxes on my Thrift Savings Plan? A. This is a question for your tax preparer.