Q. Federal employees now have the option of investing a portion of their Thrift Savings Plan contributions into the Roth option. As many of us know, contributions to the Roth TSP are from after-tax income. The benefit comes from tax-free earnings. The way I understand the rules, we must contribute to Roth for five years and not make any withdrawals until we are age 59½. The traditional TSP also uses the 59½ rule, unless we retire at age 55 or later. When we make withdrawals from our TSP account, the money is divided proportionately from both the traditional and Roth funds. For example:…
Yearly Archives: 2013
Q. Someone had a recent question about Thrift Savings Plan fund investment options in a speculative market, and I noticed in reading some of the comments at blog.federaltimes.com, a recommendation of “What’s safer than either the G or F Funds, alone, is a combination of all five funds at once. Without stocks, how are you going to hedge the risk of owning the G and/or F funds?” Doesn’t being in one of the L funds do that for you? Also, would you move your TSP funds out of the TSP at retirement into an IRA? A. Yes, the L funds…
Q. I would like to know a good allocation of my Thrift Savings Plan funds. I retired a year ago, and I am under CSRS. I have about $140,000 in the F Fund. I am 60 years old and do not need the money as of yet. I am looking for a fairly safe allocation within the funds for a 6 percent to 10 percent return. A. A good allocation will produce the maximum possible expected return in exchange for the level of risk it produces, and there are many such allocations. You should note, however, that there many more…
Q. I am a 64-year-old CSRS employee. If I transfer some of my Thrift Savings Plan into an IRA with a private company, does it need to go into a traditional IRA, or can it be transferred into a Roth IRA? A. It can go into either, but check with a CPA before proceeding.
Q. I recently took out a $40,000 Thrift Savings Plan loan so I could refinance my house. I had a first 4.875 percent and a second 8.5 percent. This lowered my monthly house payment by $1,000. I am paying it back over five years at $309 per payment. Would it be better to lower the amount I contribute from 10 percent to 5 percent and put that amount toward the loan? I did a quick calculation, and the taxes would be an additional $1,250 a year (approximately) since I would lose the pretax exclusion on the $5,000. A. I think I’d stick with the…
Q. I am taking the Voluntary Early Retirement Authority from the Postal Service and am trying to decide how to withdraw funds from my Thrift Savings Plan. I have about $300,000 in my account and have a mortgage of $150,000 with about 10 years until payoff. Should I take a lump sum and pay off my mortgage and keep the remaining money in TSP? Or should I just start withdrawing approximately $2,000 monthly to cover mortgage payments? I am afraid if I pay off my mortgage, the tax hit would be to great. A. I suggest that, as long as your mortgage…
Q. I will be retiring Jan. 31 from the Postal Service. In May, I will receive $10,000 and in May 2014, I will receive $5,000. Can this compensation be used to fund an IRA in years 2013 and 2014 even though I will be retired and not working another job? Is this considered earned income? I know federal and state tax will be deducted. I don’t know yet if Social Security will be deducted, too. What are your thoughts on this? A. I believe that these payments are considered retirement income, and, therefore are not considered the basis for IRA contributions, but you should consult…
Q. I am in CSRS. Can I still invest after-tax money in the Voluntary Contributions Program and then convert it to a Roth IRA, or have things changed in 2013? A. To the best of my knowledge, you can.
Q. I am 47 years old and retired from the uniformed services almost three years ago. I work as a federal civilian. I have two Thrift Savings Plan accounts and two questions. 1. Can I roll my uniformed service account balance into my federal civilian account balance? If yes, how? If no … 2. If I don’t reinvest in another tax-deferred retirement account, and elect to withdraw 100 percent of my uniformed service balance, what penalties will I pay (if any) in addition to taxes? A. You may combine your uniformed services TSP account into your civilian TSP account. Use Form TSP-65, which…
Q. I have a friend who has been receiving workers’ compensation benefits for about 25 years but is not yet separated from service and worked under CSRS. Can he apply to the Office of Personnel Management to receive the monies in TSP in a lump-sum payment without having to retire? Or will he have to apply for disability retirement first? A. As long as he is employed, the in-service withdrawal rules will apply.