Q. I am 25 years old, and recently joined the government. It is difficult to fathom retirement at my age, but I understand that I can get ahead by taking time to address my financial planning needs now. I don’t really have solid retirement goals. Let’s imagine I will retire around 2050. My investments need to provide support beyond any retirement date. I understand the risks associated with investing in stocks vs. mutual funds. I also understand that I can take more risk at a younger age. And I am comfortable taking on risk. After all, we’re only talking about…
Yearly Archives: 2013
Q. I have 21 years of federal service including four years of military time. The redeposit is about $6,500. I will be eligible for Social Security at 62, and the reduction to my annuity will be about $250 a month. In your opinion, would it be advisable to take this money from my Thrift Savings Plan account to pay the redeposit? The break-even point is about 2½ years. What factors should I take into account? A. The answer depends upon what retirement system you’re under, whether or not you have dependents who will be relying on a survivor annuity, your tax…
Q. My wife has contributed to her Thrift Savings Plan all her career and we will draw on it soon. We both have federal pensions and Social Security pensions that do not count toward income for purposes of the Social Security cap. If she receives her TSP in a lump sum, I know we have to pay taxes, but will that money be considered income for that year and offset our Social Security pensions, or is her TSP considered part of her retirement income? A. TSP withdrawals are not considered earned income.
Q. Can I make a voluntary contribution and roll it over to a Roth IRA as a retiree? Am I correct that this would have to have been done before retirement? I took a voluntary early pension in 2004 at age 50. A. You are correct in that you may not make a VC after you retire.
Q. If I cash out my Thrift Savings Plan now that I am retired, will that income disqualify me from getting the retirement supplement? I am 61 years old and had 27 years in. A. No.
Q. We plan to retire from Washington, D.C., this year and currently live in Virginia. When we retire, we will immediately relocate to Nevada. Do we have to pay Virginia state tax on our annual leave check? A. This is a question for a CPA.
Q. I am a single FERS employee. In 2012 and prior years, I have been able to contribute the maximum amount to my Thrift Savings Plan account to bring my adjustable gross income below the income phase-out limit to be able to contribute the maximum to a Roth IRA. However, in 2013, I believe my AGI will exceed the limit and I would like to take advantage of the Roth TSP option. If I contribute the maximum $17,500 to the Roth TSP, can I still invest in a traditional IRA? If so, can I take the IRA deduction even though I make…
Q. I will retire soon and have access to a nice sum of cash that I want to invest. Does it make sense to use the Voluntary Contributions Program to a Roth vehicle to invest all or part of this money? A. Yes, as long as you can put the money away in the Roth for the required holding period.
Q. I will be retiring this year after 21 years in the Air Force. I have $20,000 in the Thrift Savings Plan and was wondering if it would be better to roll it over into an IRA or pay off all of my credit debt. How big of a hit would I take for withdrawing my TSP early? A. It’s impossible to say which is better without some careful planning and analysis. If you trigger the early withdrawal penalty on a TSP distribution, you’ll pay 10 percent of the earnings distributed.
Q. I recently asked to withdraw my Thrift Savings Plan account. I understand that they automatically withhold 20 percent of the balance. I live in Pennsylvania and was wondering if I will have to pay more taxes even though TSP withheld the legal limit of the 20 percent. I am trying to figure out if I should be expecting a bill from the Internal Revenue Service once I file my taxes for 2012. Maybe I’m overthinking this, but I’m trying to buy my first house and heard rumors that the money can be used for this without penalty. A. The 20 percent withholding…