Q. For the past five years, I’ve been contributing the maximum to the traditional Thrift Savings Plan (balance north of $127,000). In 2014, I plan to switch all contributions ($17,500) to Roth TSP. I have more than four years until military retirement (April 2018). At that time, will I be able to transfer all Roth TSP contributions to my Roth IRA? I have no plans of transferring the traditional TSP balance. The goal is to combine Roth TSP/Roth IRA contributions and pay cash for retirement home. We don’t want any debt, including mortgage upon retirement. A. You may not selectively…
Monthly Archives: December, 2013
Q. I am a federal worker who will turn 50 next year. I plan on putting in the maximum amount for contributions ($17,500) and catch-up contributions ($5,500). Thrift Savings Plan form instructions (TSP-1, TSP-U-1-C) require a whole dollar amount for contributions per paycheck, and we get paid every two weeks. $17,500/26 = $673.077. $673 x 26 = $17,498, which is two dollars short of the limit. The catch-up limit doesn’t kick in unless you reach $17,500, but there is no way to get there with the current set of instructions. What do you recommend? I don’t want any penalties if…
Q. I am confused about the five-year rule for Voluntary Contributions Program funds rolled over into a Roth IRA. If a Roth IRA has been funded for five years, is there still a five-year withdrawal waiting period for funds transferred from a VCP account into that IRA? A. The five-year clock applies to each conversion, but how it will affect you isn’t clear from the information you’ve provided. The answer depends upon your age and how much you withdraw. I suggest that you read Internal Revenue Service Publication 590 and consult a CPA before proceeding.
Q. I’ve just been flying straight with the L2030 plan until I can get some reliable advice. I would like to keep my capital I have in the Thrift Savings Plan, receive a monthly or quarterly check, and reinvest the amount I don’t need back into my capital. When I turn 70½ (in four years) I’ll have to start receiving the required minimum distribution, which I can’t reinvest. I don’t want to get an annuity because I’d have to give up my capital. How can I hold on to my capital, reinvest in it and possibly leave that money to my children…
Q. Can I transfer funds from Simplified Employee Pension Individual Retirement Arrangement (SEP-IRA) to the Thrift Savings Plan, or does the distribution have to be an “eligible rollover distribution”? I would not move the Salary Reduction Simplified Employee Pension (SAR-SEP) funds if it would be considered an “eligible rollover distribution” due to the withholding for income tax. A. As long as the accounts do not contain any after-tax money, they can be transferred without withholding to the TSP.
Q. If I take money out of an IRA to make a redeposit into CSRS, do I have to pay taxes on the money taken out of the IRA? A. Yes.
Using your Thrift Savings Plan to maximize your retirement standard of living isn’t complicated if you’ll ignore all of the lousy “advice” swirling around out there. Twenty years ago, federal employees were ignored by the investment industry. Most advisers and brokers need to take custody of large sums of your money to take their fees and commissions. They are either investment sellers charging sales commissions or “asset gatherers,” skimming a percentage each quarter from every dollar you invest. But until recently, federal employees were assumed to have their retirement wealth tied up in pensions, with little left over to invest…
Q. I’m unsure of what to do with my Thrift Savings Plan account. I understand that I could leave it in the account as it is until I’m 70½. I can also make a full or partial withdrawal. Full withdrawal is not an option for me. A TSP life annuity (both single or joint life) option is based on life expectancy or until the money runs out. Also there is the TSP annuity vendor (MetLife) where I could get the annuity but money used to purchase this annuity goes to the insurance company if you die before it’s used up.…
Q. I have an opportunity to retire under a Voluntary Early Retirement Authority. I have 30+ years of FERS service, non-law enforcement. My age will be 53 years and 11 months if I retire under this VERA offering. At what age will I have full access to my Thrift Savings Plan without the 10 percent early withdrawal penalty by “taking substantially equal payments over my life expectancy.” At what age will I have full access to my TSP without the 10 percent early withdrawal penalty by NOT “taking substantially equal payments over my life expectancy.” If immediately upon retirement I…
Q. I retired in 2010 and, at that time, I was informed that I was in the wrong retirement system (FERS). I chose to be put in the proper program (CSRS Offset). I was also told by my human resources manager that, since I was in retirement, I would be able to keep all of my Thrift Savings Plan contributions, including the agency’s matching contributions. On Dec. 3, the agency forfeited about a fourth of the value of my TSP account, without any notification that this was going to happen. Is this a legal action? Why was I not informed…