Q. I am planning on retiring Dec. 31 at age 68 with 10 years of FERS service. I will be 69 on Jan. 18, 2013. What are my options regarding my Thrift Savings Plan account? Should I roll over to my Individual Retirement Account? A. Following retirement, you may withdraw your funds from the TSP, roll them over to an IRA, or leave them in the TSP and continue to manage them. You can learn about the details at www.tsp.gov. In general, I recommend leaving your funds in the TSP as long as possible to take advantage of the unique…
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. If I take $40,000 for 15 years from TSP, using the calculator it shows that at the end of the 15 years, I would be paying $45,000. What happens if I pay it off in a year (for example, I come into some money, sell an investment property). Do I still pay that $5,000 in unpaid interest, or is the interest re-amortized to the current date of payoff? Basically, I need some extra money for a down payment on a new primary residence. If I take the loan over the 15 years, it is a very low payment ($112…
Q. Do you happen to have any articles about the pros and cons of paying off the mortgage in retirement? We had paid off ours. But we moved to downsize before selling the bigger house. So we took on a VA mortgage at a relatively low interest rate last November. When we sell the big house, we have two options: Keep the mortgage and invest all the money, or pay off the mortgage and invest the balance. I retire in January 2013, and our pension income will be half our current income. Is there a “calculator” to evaluate the choices? A.…
Q. I am in the process of moving my traditional IRAs into the TSP, but would like to keep some money in asset classes not available under TSP. Specifically, I have in mind current investments in emerging markets and real estate investment trust index mutual funds. Assuming that I would not need to liquidate these two classes of assets for at least five years, do you have any advice on the percentage of the total amount of post-retirement assets I should hold in each class? A. I recommend that you forgo this unnecessary concentration (it’s not diversification) and move the money into…
Q. I am retiring under FERS with 23 years of service at age 66. Can I set up with TSP to draw an amount from my account on a yearly basis? Do I have to pay taxes on the amount that I withdraw? Is there an age limit where I do not have to pay taxes on the withdrawal amount? A. You may only set up automatic distributions from your TSP on a monthly basis. Every dollar you withdraw during the year will be counted as taxable income for the year, regardless of your age.
Q. In March 2013, at age 56, I am eligible to retire under FERS as a federal law enforcement officer with 23 plus years of service (20 as an LEO). I turn 57 on Oct. 11, so I will be forced to retire Oct. 31. Assuming I do not need the money immediately, what are my options with regard to my Thrift Savings Plan? I do not want to pay any penalty and want to pay as little in taxes as possible. It was suggested that I roll it over to an IRA so that in event that I need…
Q. I have resigned from my position with the federal government in order to attend graduate school effective in May and will have been employed for a year and 10 months. I realize I need to be employed for three years for TSP vesting requirements, and I will likely forfeit my automatic 1 percent agency contribution in May, but after grad school, I intend to return to work for the federal government. How does this work with vesting in this situation? Would I be returned the 1 percent agency contribution (plus interest?) upon working an additional year and two months…
Q. I am a FERS employee. I am interested in rolling over my outside Roth IRAs into the Thrift Savings Plan’s new Roth IRA. Can I do this? If so, how do I go about it? I am paying too much in fees for small amounts. A. Unfortunately, this is not permitted by the TSP.
Q. I have a State of Kansas deferred compensation 457(b) pretax fund from when I worked for the state. Can I roll this into the Thrift Savings Plan without tax consequences? If so, how do I go about the process? If I have to receive a check from the fund directly — not made out to me — I believe I have 60 days in which to get it into another fund. A. If it contains only pretax money, you may transfer it to the TSP. Use Form TSP-60 and follow the instructions.
Q. I will be starting monthly payments from my Thrift Savings Plan account. I’m confused as to this making your payments last for 10 years. Is this really putting me into a better tax situation? You must pay on your taxes at the end of the year. I spoke to someone at TSP, and she was explaining that it is to my benefit. If your payments last 10 years or longer, they only tax you as though you’re married with three dependents. If it’s not lasting for 10 years, they take out 20 percent every month. Isn’t this a wash…