Q: Let’s see if I’ve got this right: If I request monthly withdrawals from my Thrift Savings Plan account and change the amount each year, I’ll be able to receive a monthly check for life and still be able to build my principal, which I can pass on to my children or grandkids. Does TSP have such a plan? What option is it and how does it work? If I need some emergency money, would I be able to make a withdrawal from my principal? A: You may request a full withdrawal as fixed monthly payments. You set the amount,…
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: Will I get full Social Security and a “full” Federal Employees Retirement System annuity when I retire at age 66? And when I invest my Thrift Savings Plan money, will that affect how much I receive from Social Security? A: I can’t say whether you’ll get a “full” FERS annuity, but none of these benefits, on their own, will affect the others.
Q: I have read in the press that the new health care legislation limits flexible spending account contributions to $2,000 a year. When will this limit take effect? A: The annual FSA contribution limit is scheduled to be reduced to $2,500 beginning in 2013.
Q: You answered a question in March about a “special rule” that allows for a tax-free transaction if someone split a traditional individual retirement account, converting some into a Thrift Savings Plan account and the rest into a Roth IRA. Please tell us the special rule so we have it when questioned. Also, can a retiree do this? I would convert my (pre-tax) earnings in my traditional IRA to TSP and then roll the basis into the Roth. A: You’ll find the information you’re looking for on Page 23 of IRS Publication 590. If you’re not sure about how to proceed, you…
Q: My husband and I want to convert all or a portion of our traditional individual retirement accounts into Roth IRAs in 2010. Our contributions have been nondeductible, and our IRA accounts are about double the investments we have made (value versus basis). So, we will be paying tax on the earnings. Then I thought about our Thrift Savings Plans. Are these considered IRAs for the purposes of this conversion opportunity? I read that the IRS will consider all IRAs; you can’t pick and choose among or within our IRAs regarding the conversion, but I certainly would not want to…
Q: Since I’m not allowed to deposit my lump-sum annual leave check into my Thrift Savings Plan account, where’s the next best place to put it? Will this amount be considered part of my 2010 income regardless? A: Generally, I prefer the following order for retirement savings deposits: TSP, deductable individual retirement account, Roth IRA, taxable brokerage account. Your income will be taxable in the year in which you constructively receive it.
Q: I have not yet seen what the 2011 Thrift Savings Plan contribution limits will be, to include catch-up contribution limits. Is there anything in the wind to increase the amounts from the 2010 limits? A: The limits are set by law and increase with inflation in $1,000 increments. Given the low overall rate of recent inflation, I wouldn’t expect an increase in the coming year.
Q: Have you published an article on the pros and cons of the Thrift Savings Plan’s various post-retirement withdrawal alternatives? A: My general recommendation is to leave your money in the TSP as long as possible.
Q: I was in federal service for three years and contributed to the Thrift Savings Plan. I left federal service more than five years ago, but I still have money in my TSP account, all in the G Fund. It has grown over the past five years by several thousand dollars despite the fact that I have not put any money into the account in those five years. Is there a way I can contribute to TSP even though I am no longer in federal service and have not contributed any money to the fund recently? A: Yes, you can…
Q: I have 18 years of federal service and will be working for another 12 years before retiring. I contribute 15 percent per pay period to the Thrift Savings Plan, all going to the F Fund as of September. Can I reduce the contribution from 15 percent to 10 percent for the next couple of years and then move it back to 15 percent? A: Yes.