Q. I contribute to the Thrift Savings Plan where you don’t invest the money. What is the difference between the Roth IRA and TSP? Would you recommend that I look into the Roth IRA? A. The TSP is funded with pretax money, but when withdrawn, the money is taxed as ordinary income. The Roth TSP is funded with after-tax money, but the money is exempt from income when it is withdrawn. Everyone who is eligible to participate should consider the costs and benefits of both options, although it can be difficult or impossible to know in advance that one or…
Yearly Archives: 2013
Q. What is the definition for the Thrift Savings Plan early distribution exclusion “made as a result of total and permanent disability”? Does this mean that a retired military member with a Veterans Affairs Department-certified disability who is under age 55 is excluded from the 10 percent early withdrawal penalty? Specifically, I would like to withdraw my TSP in full upon military retirement at age 42 and will most likely have a portion of VA-certified disability based on injuries sustained on active duty. What justification is needed to report to the Internal Revenue Service when you file your taxes? A. I…
Did you know that the Thrift Savings Plan puts free money into the account of every investor? It’s true! And, I’m not talking about the automatic 1 percent or matching funds contributed to the accounts of FERS-covered employees. I’m talking about something different. Even participants covered by CSRS get this free money. Every participant gets it every day, every week, every year they maintain a TSP account. And the more money in the account, the more free money you earn. Technically, the money isn’t contributed to your account — it’s just not taken out of your account, as it would…
Q. I agreed to a $20,000 retirement incentive bonus offer from the Postal Service and retired in May 2011. The first half of the bonus was paid in November 2011 and the second half in November 2012. Today, I received a W-2 from the Postal Service describing this second half of the bonus as wages received in 2012 even though I officially retired in May 2011 and haven’t worked for them since then. (I had been assuming the bonus payment in 2012 was going to be incorporated into my CSRS retirement accounting.) I haven’t earned any other income since I retired,…
Q. I have worked in the GS system for 13 years, and I have always taken out the maximum percentage allowed for my Thrift Savings Plan. For the past 13 years, I have put everything into the G Fund. I am not very educated on which funds to invest in. At this time, I have $165,000 in my TSP account. I would like to know which funds I should invest in and what percentage would best suited for me. I am 42 years old, and I plan to work until I am 65 to 67 years of age. A. You’ve…
Q. I retired Dec. 31. I plan to use the 10-year monthly annuity option. Does the principal in my account continue to be in play in the market? Will I benefit or suffer from market volatility? A. If you use your Thrift Savings Plan money to purchase an annuity, you give up ownership of the principal in exchange for the guaranteed payments. The principal will be removed from your account to pay for the annuity.
Q. I have been contributing to the Thrift Savings Plan for a number of years. I am a GS-4. I will have 28 years of federal service in June. In the beginning, I started contributing $10 (twice a year), then $25 (a year). Beginning last May, I started contributing $50 to the TSP out of my paycheck each pay period. At this time, I have no plans on retiring. I was hired under FERS. However, with furloughs, cutbacks and early retirements, should I keep increasing my TSP by $50 each year, or should I increase it by either $75 or $100? A. You should contribute…
Q. I am 62 years old and still a federal employee (for the next several years). I am thinking of withdrawing $100,000 of the $250,000 I have invested in Thrift Savings Plan. The purpose behind this withdrawal is to save paying federal taxes on this amount. That is, we will be selling an investment property that has $100,000 in “unrealized tax losses” and we should be able to offset the taxes owed on the $100,000 TSP withdrawal with the $100,000 loss from the sale of the property. I am confused by a statement on the TSP website that says if…
Q. I am a 52-year-old Postal Service employee and am seriously considering liquidating my TSP account. What are the penalties for this action? Would there be a less painful way to do this to lessen the amount of money I will lose? A. The early withdrawal penalty is 10 percent of the gains in the account. The only way to avoid the penalty is to meet one of the exceptions listed on Page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.
Q. Is there a limit to the number of rollovers that can be made from a single, traditional IRA to the Thrift Savings Plan? In other words, can I roll over my previous years’ deductible IRA contributions to my TSP account each year? A. I know of no limit.