Q. When I prepare my taxes, do I add my Thrift Savings Plan withdrawal amount in with my total earnings for the year? If not, where do I put it? A. Sorry, but we don’t prepare tax returns at Ask the Experts. That’s a question for your tax preparer.
Monthly Archives: February, 2013
Q. I am 55 with 13 years of service. My wife is three years younger than me and will work three additional years — until I am 65. My Thrift Savings Plan balance is approximately $200,000, and I hope to retire at 62. My wife and I have other investments of approximately $300,000, totaling $500,000 (mostly 401(k), but approximately 20 percent Roth). I understand that when I am retired and after we reach the “threshold,” I will pay one of every two dollars made. Is this true for dollars dispersed from Roth accounts? I understood them to be “tax-free.” A.…
Q. I am working, waiting for approval of disability retirement under FERS. Will I be penalized 20 percent if I withdraw my Thrift Savings Plan in lump sum when I am approved for disability? I was diagnosed with Stage II multiple myeloma in May. A. The exemption from the early withdrawal penalty to which you are referring is for a distribution taken as a result of a total and permanent disability. The TSP cannot certify that you qualify for this exemption and it is up you, or your tax preparer, to demonstrate that you meet this exemption.
Q. I am a 59-year-old federal employee with 34 years of service under CSRS. I am retiring soon and heard about the Voluntary Contributions Program. I don’t have a wad of cash except accessing some of the equity in my home (I have about $200,000 of equity, and I could pull up to $100,000 out). Is it worth refinancing (at a low 3.5 percent) to access the money and use the VCP to convert it into a Roth IRA? A. Probably not, unless you need the cash for expenses.
Q. Can you make a rollover from a private post-tax 401(k) into the Roth TSP account? A. If it’s Roth 401(k) money, yes.
Q. I am 26 years old and have been working in the federal system for three years. I am a GS-9 Step 2 and contribute 7 percent of my income to my Thrift Savings Plan. Since I have a long ways to go before I retire, I would like to know what percentage I should put in each fund, if any? A. I suggest that you consider investing your money in the L Fund that most closely corresponds to your life expectancy.
Q. All of my Thrift Savings Plan deposits are in the G Fund. I am a CSRS retiree. Since most of these funds are interest earned on federal bonds, are my withdrawals taxable by the state? I know they are federally taxable. I believe my contributions (which started in 1987) were both federal and state tax deferred, but I can’t recall with certainty. I called the Montana State Revenue once on this and they said they aren’t state-taxable, but I have my doubts. A. You should consult a qualified tax preparer for the answer. In general, your withdrawals are taxable, unless your…
Q. I am retired and made a voluntary contribution to CSRS and then rolled it over to a Roth IRA in 2012, prior to my retirement. Now I’m interested in what I need to do, if anything, on my 2012 tax returns regarding this rollover. Will the Office of Personnel Management be sending me a Form 1099-R? Any advice on how to report on my 1040 will be helpful. Pub 590 (tax year 2011) says that “you do not include in gross income any part of a distribution from a qualified retirement plan that is a return of contributions to the plan.” A. We…
Q. I’m trying to understand why the Thrift Savings Plan calculator that allows “monthly” or “lifetime” projections automatically defaults to the required minimum distribution amount at age 70½ when my (expected) withdrawals are more than the Internal Revenue Service RMD limit. Which takes precedence: the IRS RMD which produces a significantly smaller amount of TSP payout, or the amount I wish to take out? A. You must take at least the RMD amount each year to avoid a substantial penalty.
Q. I understand that some states do not tax CSRS or FERS pensions. I also understand that there are some states that do not tax or only partially tax Thrift Savings Plan withdrawals. Would you please list the states that have income tax and that fully or partially tax TSP withdrawals? A. Nope. You’ll have to do that research yourself. I suggest you start by directing your Web browser to “google.com.” Or, I’m pretty sure that Kiplinger.com can provide this info.