Q. I am expecting to receive a payment from a pension plan for which I am expecting to be charged the 10 percent early withdrawal penalty. What is the best method to pay that penalty and avoid any additional penalties for not withholding sufficient taxes when I file my annual returns in April? Can I send the money to the Internal Revenue Service ahead of my regular tax filing? If so, what form do I use to remit it? A. This is a question for your tax preparer.
Monthly Archives: July, 2013
Q. Is there any way to have the Federal Retirement Thrift Investment Board add an investment option to the Thrift Savings Plan offering for religious reasons? The holy books of the Christians (Bible), Jews (Torah), and Muslims (Qur’an) all forbid earning or paying interest (aka usury-defined as a “use fee” for cash). Since I practice my faith as best I can, that leaves me no option to participate in the TSP program because all the offerings have some element of interest derived income in them. Although in modern times “usury” means exorbitant interest, in the holy books it was just a blanket…
Q. Can you leave a percentage of your Thrift Savings Plan account to grandchildren’s 526 college fund? A. This is really a question for an estate planning attorney, but it seems to me that this is like asking if you can designate a person’s Roth IRA as a beneficiary — and the answer to that questions is no.
Q. My understanding is that a spouse’s traditional IRA (not a Roth IRA) cannot be transferred into a government employee’s Thrift Savings Plan 401(k) account? Can you tell me if that is correct? A. That is correct.
Life insurance. Two words that can spoil even the most perfect day. It’s confusingly complex, can be expensive and it’s all about death — very often the death of you or someone you love. While I can’t do much about the second two characteristics, I can clear up much of the confusion. The purpose of life insurance is simple: It’s there to satisfy a financial need that will accrue as the result of an early death and that will go unfulfilled by other available resources. That’s it. Three parts. Financial need, early death and unmet by other resources. If all…
Q. I’ve been putting money into the C Fund and S Fund but keep 50 percent in the G Fund. I’m not doing too well. I move it when the stock market dips and put it back when it rises. Can I put all of my money into an L Fund and get better results? If so, which one? I plan to retire in 15 years. A. Really, selling after the market drops and buying after it rises isn’t working out too well? Go figure. Identifying and applying the asset allocation scheme that meets your needs with a minimum of risk would…
Q. If you have a Thrift Savings Plan designation of beneficiary on file but you survive the maximum age to keep the money in the account and then are required to start withdrawing until the fund is depleted, what are your options to still disburse the money to the same beneficiaries? A. The beneficiary designation only applies to funds remaining in your TSP account at the time of your death, and thereafter. If you entirely deplete your account before you die, then the beneficiary designation is irrelevant.
Q. 1. I have $12,000 in student loans at about 6.5 percent interest rates. I had considered taking a loan from my Thrift Savings Plan account to pay off my balance as the interest rate I would pay back on the TSP loan is lower than my Stafford Loans. What is the maximum amount one can take out on loan from their TSP account? What is the repayment time frame demanded by TSP? 2. If I were able to pay off my Stafford loans with a TSP loan, I am not sure that would be the best decision. I am…
Q. I understand that the lump-sum payment for unused annual leave is treated as wage and salary income and is subject to federal and state (if any) income tax, FICA (Social Security) and Medicare taxes. How is it treated for Thrift Savings Plan purposes? Are individual and government matching contributions made? Can a retiring employee top up their contributions from the lump sum (up to the IRS-determined maximum)?
Q. Does the withdrawal of your Thrift Savings Plan annuity affect the amount of your special retirement supplement or Social Security if it exceeds the maximum amount of money you are allowed to make under Social Security?