Q. I began putting money in the L2030 in 2008 and didn’t really start to pay attention to it until mid-2011. When I noticed I had about $30,000 in it, I didn’t want to lose it to the current volatility. So I put it all in the G Fund and then the market started to increase. Does it make sense to go back to the L2030 since share price has increased $2.80 per share from when I left it, or is it better to wait until the price is closer to when I left it? I think I will just…
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. On several occasions, you have stated that taking your Voluntary Contributions account as additional annuity (which pays about 7 percent to 8 percent depending on age) is not such a good deal compared to investing the money and taking the investment earnings. But would you say that it is a very good deal compared to using the account to purchase an annuity from an insurance company which pays way less than 7 percent to 8 percent (say 3 percent)? A. It would depend upon the specifics of the annuity you’re considering and your circumstances. It’s impossible to give a…
Q. Can I designate my adult, nondependent child as a beneficiary for my Thrift Savings Plan lifetime annuity? Would they be considered an “insurable interest”? This would be a perfectly healthy adult child that may or may not be married at any given time. A. You may name anyone you choose as a beneficiary for your TSP life annuity. There is no insurable interest requirement for beneficiaries.
Q. I recently transferred my “entire” traditional Individual Retirement Account from Fidelity to the Thrift Savings Plan. When I started the IRA in 1983, I opened it with pretax money. From that, there was a front load cost. To the best of my knowledge, they rolled all of it over. How does that affect the tax situation? Is that previously taxed money identified? A. When you moved it into the TSP, you signed a statement that it was all pretax money. It will all be taxed as ordinary income when withdrawn.
Q. I am 67, retired, and I am considering withdrawing $21,000 from my Thrift Savings Plan to pay off my home mortgage payments of $500 a month. I’m helping two grandchildren with college and the $500 a month is rough. What would my tax liability be on $21,000? A. The only way to answer this question is to prepare your tax return for the year of the withdrawal.
Q. I am a Defense Department employee under CSRS, and am eligible to retire in two years at age 55. I have been making contributions to the Voluntary Contributions Program for many years. Under VC regulations, upon withdrawing the account (among other options), I can roll over the interest portion of my VC balance direct to my Thrift Savings Program, and receive my contributions portion back as a cash refund, from the Office of Personnel Management. On the upcoming Roth TSP, will there be an option to roll my VC portion, direct to the Roth TSP, in addition to rolling the…
Q. I owe $24,000 to my Thrift Savings Plan from a loan I made. If I take the early retirement, how much will I owe in taxes to the government? I live in Florida. A. The amount you’ll owe on the unpaid loan balance can only be determined by completing your tax return for the year. If you’re not prepared to make the estimates by running a pro-forma return, then you should consult a tax adviser who is.
Q. I’m a 50-year-old postal clerk (FERS) with 23½ years of service, and I want to get out. I want to move from Florida back to my home state 1,000 miles away. I think I only have four options, and I’m looking for advice on what would be best for me. 1. Retire with 50/20 and either pay the penalties or defer or postpone annuities? If I do that, what will the penalties be? 2. Stick it out for another year and a half until I have 25 years of service and retire. If I do that, will there be…
Q. I am 41 and due to unemployment for two years following my active-duty retirement, I need to withdrawal all my Thrift Savings Plan funds. When the 20 percent is withheld from my payment, does that then get applied to my tax liability for this year? I understand that I owe 20 percent in taxes on the money, so is it set aside like federal taxes withheld in a regular paycheck? In addition, there will be a 10 percent penalty due to my age? Is the penalty automatically taken out if I elect for a total withdrawal, or must I set this aside when filing 2012 taxes? A. The…
Q. I know that I can’t put my wife’s Individual Retirement Account into the Thrift Savings Plan, so we would like to invest it into an F Fund equivalent. Can you identify such a fund that we can roll her IRA into? A. Any fund that is based on the Barclay’s Capital U.S. Aggregate Bond Index should do — the lower the cost, the better. Try AGG from iShares.