Q. My spouse is a postal worker, age 48, who will have eight years of service and plans to leave the workforce in February 2015. She plans to defer retirement until age 62. I am a FERS participant who will have 36 years when I reach my MRA of 56 in September 2019. We both have TSP accounts. When my spouse leaves the workforce next year, will I be able to transfer her TSP into mine so that they are combined into one account? Will they need to be left separate for a number of years or always? What are…
Author Mike Miles
Mike Miles
Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.
Q. I’m getting ready to retire in February 2015. I have invested in the TSP since 1997. After I retire, is it too late to invest in an Roth IRA since I can’t contribute to my TSP plan? A. The rules for this are complex and depend upon your income, marital status and employment. You should ask your tax preparer to provide you with guidance on this.
Q. I’ll be retiring this year, and using a portion of my TSP account balance to purchase a retirement home. My question is: For example, If I take an Age-Based In-Service Withdrawal of $100,000, and the TSP withholds 20 percent for taxes ($20,000) and I request an additional withholding of $10,000 to cover any tax shortfalls, will the declared taxable distribution be $100,000 or $130,000? A. The withholding is taken from the withdrawal, so the declared taxable distribution will be $100,000, you’ll receive $70,000 of it, and $30,000 will be deposited and held against your tax liability for the year.
Q. I am a retired federal law enforcement agent. I retired under the civil service plan but I invested in the FERS system. I am now 70 1/2 years of age, I have a balance of $72,000 in the TSP account and plan to withdraw $500 in monthly payments. If I die, will my wife, who is my beneficiary, continue to receive those monthly payments? A. Those payments will stop at your death, but your wife may take over the account and resume the distributions.
Q. Does the TSP offer any way to keep money in TSP for beneficiaries to continue growth? I just read about a stretch IRA that allows beneficiaries to keep money in the account when you die. The only stipulation is they have to take the RMD right away and it is taxable. A. Your spouse beneficiary may inherit your TSP account and treat it as their own. Your non-spouse beneficiary may retain the proceeds in an Beneficiary IRA account, subject to the RMD rules for that type of account.
Q. My concern was that I took all my money out of the TSP when I left the government in 1989 and then came back years later, in 2004. Does that affect my date of eligibility (SCD for retirement)? Related question: Will I be considered to have worked at this point (as of March 2014) 25 months (old service) plus now about 10 years, so about 12 years total, or only 10 years (my current service beginning in 2004)? Also, when my FERS annuity is figured, is that on 10 years or 12 years? Finally, am I currently eligible to…
Q. If a Thrift Savings Plan in-service withdrawal is used to purchase rental (investment) property, are federal taxes on the TSP in-service withdrawal deferred until the rental property is sold? A. No. The withdrawal will be considered ordinary income in the year it is distributed.
Q. I have funds in my TSP account, turn 70 ½ in 2015, and have recently been furloughed from federal service but have not resigned or been separated. I am eligible to return in 2015. I understand that if I return to federal service in 2015 without separating, I can resume TSP contributions and do not need to take RMD until I separate. However, I understand that if I am separated from federal service in 2015 and do not choose either an annuity or a monthly distribution plan, I must accept full distribution. In that case, can I call the…
Q. I have two years of temporary services. What are the pros and cons of buying back the temp time? I am approaching my 27th year of federal service. I came in under FERS; at what age can I retire and get my TSP monies without being penalized? A. You may avoid the early withdrawal penalty on TSP distributions at any age if you meet one of the exemptions listed on page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf. One of these exemptions is for those who retire during or after the calendar year in which they reach age 55.
Q. I am eligible to buy 12 years of military service credit for my civil service retirement. I am curious if I can take a 401(k) from a previous job and roll it over into the FERS system without a tax penalty. Can you help me with this? A. You may not.