Q. I am concerned about the stolen data from a TSP-contracted computer that’s been in the news recently. I know TSP is assuring everyone the information has not been used, and they are offering those affected a credit monitoring service for one year free. That does little to comfort me that the money in my Thrift Savings Plan (or IRAs in mutual fund companies elsewhere) is secure. Banks have FDIC. Savings and loans and credit unions also have insurance to protect depositors from theft. Is there anything out there we can rely on to assure reimbursement if our TSP or…
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 have been a retired CSRS employee for more than two years and understand that I can transfer my traditional IRA to the Thrift Savings Plan, where the expenses are much lower. Some portion of my traditional IRA contributions in my early career years was tax-deductible. How would that be treated when I move the funds to the TSP and eventually start withdrawals? Or do you recommend I transfer the traditional IRA to TSP since some of my funds are tax-deductible? A. I think you mean that your IRA contains money that has already been taxed. That is, contributions that were…
Q. I have an existing Roth account with AmeriFund. The beneficiary to this fund is my daughter. If I roll this over into the Thrift Savings Plan, can I still have my daughter beneficiary and my husband beneficiary of my traditional TSP, since the funds remain in separate pretaxed and nontaxed accounts? A. One beneficiary designation will apply to both the traditional and Roth balances in your TSP account.
I recently completed the first phase of a study of the financial effects of disability on federal employees. The results may surprise you, as they did me. I found that a five-year reduction in your income due to a temporary disability early in your career could reduce your standard of living in retirement by more than 50 percent. This is even more surprising when you consider that this is after taking into account the maximum disability retirement benefits available under the Federal Employees Retirement System. I did not realize that a limited loss of income — limited in the amount of…
Q. I will be retiring this year. Do you think the Thrift Savings Plan annuity has a fair return? The life insurance has me puzzled. It is very expensive. Is there a better way to get this much coverage? A. I wouldn’t lock in a TSP annuity at today’s historically low rates of return. You should shop the individual life insurance market for guaranteed level term insurance and compare the rates with Federal Employees Group Life Insurance.
Q. I will be 59½ in August. I would like to make an in-service withdrawal from my Thrift Savings Plan. At this time, I have a loan out on my account. Do I need to repay this loan before I take an in-service withdrawal for the total amount in my account, and how much tax will I be charged for this withdrawal? A. You do not need to repay the loan before taking an age-based in-service withdrawal. The automatic tax withholding rate on these withdrawals is 20 percent unless you transfer your payment to another retirement plan or account.
Q. I will be retiring June 30. I contributed $100,000 to my Voluntary Contribution Plan account between September 2010 and the present. I plan to roll over the $100,000 to my Roth IRA upon retirement; have the Office of Personnel Management withhold 20 percent for tax on the interest that it earned; then roll over the remainder to the Roth IRA also. Is that doable? A. The accrued interest will be considered a conversion. I believe that is doable, but you should check with your tax preparer to be sure.
Q. I’m 57 years old, started with the Postal Service in June 1987, bought back five years and nine months of military time. What would be the difference in benefits between retiring if a VERA is offered and retiring before a VERA is offered? Would I be penalized on my Thrift Savings Plan? Can I get the Social Security supplement? Would I be able to collect Social Security supplement either way? Mike Miles: Since you’d be retiring during or after the calendar year in which you reached age 55, you would have access to your TSP account without incurring the…
Q. I am a FERS employee earning $118,000 per year. My sister is a dental assistant earning about $30,000 per year. (She’s also married and lives in a state with a much lower cost of living, while I’m single.) This question involves inheritance of our parents’ retirement accounts, and I offered our salaries because our tax obligations are vastly different. Our father has a TSP account worth approximately $110,000. Our mother has a 401(k) worth approximately $90,000. Both are retired, and both are very ill with terminal cancer. We’re wondering if our parents should each convert their retirement accounts to cash…
Q. I am 62, retiring from the Postal Service after 45 years of government service and wish to take a set amount of money from my Thrift Savings Plan account on a monthly basis. If I should I pass away prior to my wife becoming age 59½ years of age, would she have to pay the 10 percent penalty? A. No, the penalty does not apply to distributions made on account of the death of the account holder.