Q: As I understand the Voluntary Contribution Plan, eligible employees can start making deposits at any time prior to retirement. At retirement, they can choose to withdraw the funds or purchase a VCP annuity. Am I correct that after age 59 1/2, I can make a taxable withdrawal from my Thrift Savings Plan and deposit that money into the VCP to be used to purchase a VCP annuity upon retirement? A: Yes. The VCP doesn’t care where you get the money to make the deposit, as long as it is after-tax money.
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 a Federal Employees Retirement System employee and will retire at age 64. I will opt for monthly payments from my Thrift Savings Plan. I know I can change the amount yearly, but can I also change the plan in which the funds are invested? A: You may change your investment allocation in the TSP as you see fit, within the usual limits, for as long as you maintain the account.
Q: When I retire at age 56, can I take monthly payments until age 60 and then convert part of my Thrift Savings Plan balance to an annuity? Interest rates are at all-time lows, but in four years, with a potential rate increase and me reaching age 60, my monthly annuity payment would be higher than what I could get now. A: Once you begin monthly payments, your only options are to change the payment amount once each year or request the distribution of your remaining account balance. Purchasing a TSP annuity is not an option at that point. You…
Q: I understand that when an federal employee, through a rollover, transfers funds from an individual retirement account to the Thrift Savings Plan that the money transferred can only be pre-tax. My wife has both pre-tax and post-tax contributions in the same IRA. The IRA has grown for 20-plus years, so a lot of its value has had no tax has paid on it. Most of what I have read on the issue seems to indicate that because the IRA has some after-tax money in it, none of the money can be transferred into the TSP even though the amount…
Q: I am going to retire when I am 62 in roughly 2 1/2 years. I will receive my FERS retirement, a small retirement from North Carolina that is similar to FERS and my TSP annuity. Will any of these “retirement” payments affect my Social Security benefit that I also plan on applying for at 62? A: Income derived from your TSP will not affect your Social Security benefit.
Q: Will I be able to contribute to the Roth IRA and Roth TSP? What will be the combined limits if I can contribute to both Roths ($6,000 for each or $6,000 combined, if I’m over 50)? A: According to the TSP, your participation in the TSP’s Roth option, in itself, will not affect your eligibility to contribute to a Roth IRA.
Q: I worked for customs for 13 months and resigned about 10 years ago. I did not use any of my accrued sick leave nor did I transfer it when I left. I was recently hired by DHS/TSA part-time. Can you please tell me: 1. How do I get the unused sick leave I had when I resigned credited back to me? 2. In reference to TSP, can I start to contribute right away, along with receiving the ageny matching contributions, or do I have to wait like all new employees? 3. Is there a formula for calculating FERS retirement…
Q: Are FERS 6c retirees considered retired public safety officers by the IRS for the purposes of tax reporting? I am a retiree with 20 years of service, but under age 59 ½. Most of my career was a GS-2181 customs officer/pilot, but they changed us to 1877 air-interdiction-agent pilots just prior to my retirement. I would like to take the one-time disbursement from TSP and avoid the 10 percent penalty, but I am unsure if federal law enforcement is considered public safety officers under IRS rules. A: If you retired during or after the calendar year in which you…
Q: I’m considering retiring at the end of this year if VERA’s are offered again in my agency. I will be 54. I have two questions related to TSP withdrawls: 1. If I choose to take dollar-specified (vs. lifetime expectancy) monthly distributions from my TSP, it’s my understanding that I’ll be penalized 10 percent since I’m under 55 when I separate and since there’s not a waiver for the dollar-specified monthly payments option. Is that correct? Or is there some way to structure dollar-specified monthly distributions so as to be included in the “substantially equal payments” waiver? Would starting out…
Q: At age 59 ½ I took a withdrawal from TSP. It was not a loan. I borrow because I could at age 59 ½. I am now about to retire at a age 65. How can I get the rest of my money out of TSP? I have to take a lump sum, correct? A: You’ll have to take a full withdrawal, which can include monthly payments.