The Thrift Savings Plan offers you two ways to save for retirement. You may elect to defer your federal pay into a traditional account, before state and federal income taxes are deducted, or you may defer your pay, after taxes, into a Roth account. You may use one, the other or both options, and start or stop either or both types of contributions when you like. Based on the questions I receive from Federal Times readers through the “Ask the Experts” forum online, the “pay now and not later” approach offered by the Roth account is inherently appealing to many…
Q. Is it possible/advisable or a good idea to roll money I have from established IRAs (both traditional and ROTH) into my TSP account? Basically, paying into TSP over a number of years playing ‘catch up’ since I’m over 50. What kind of penalties or taxes would I be looking at?
Q. I am eligible to retire next year at age 50 as a law enforcement officer under FERS. I plan on taking life expectancy payments from my TSP/401(k) as soon as I retire. If, upon retirement, I elect to transfer my TSP balance to a company like Vanguard, will I still be able to withdraw life expectancy payments from Vanguard and avoid the 10 percent early withdrawal penalty?
Q. My wife and I are both federal employees under FERS, nearing seventy and about to retire. We have a question about how to make the required minimum distributions (RMDs). We each have a TSP account and each also have a rollover IRA from previous employment. We file taxes jointly. Must we take four separate RMDs from each of the four pre-tax accounts? Or, can we total up the combined amount of the four RMDs, and make one large withdrawal from one of the four accounts?
Q. I started making Roth TSP contributions in late 2012. I will be 70 years old in May 2017. I would like to roll over my Roth TSP into a Roth IRA before having to make any Required Minimum Distributions (RMD) from my TSP account. I think I will meet the 5-year rule for the Roth TSP on January 1, 2017. The year 2017 is also the year I turn 70 1/2, which, means, I think, that I must take a RMD of TSP funds in 2017. When should I do the rollover of the Roth TSP funds into a Roth IRA…
Q. The early withdrawal penalty is obviously different from taxes; so for Roth, if you take withdrawals during or after the calendar year you turn 55, you won’t be subject to the 10% early withdrawal penalty, but you will owe taxes on the Roth earnings? If yes, can you choose to take your withdrawals from the Traditional balance until you turn 59 1/2 and then start taking them from the Roth at that point in order to avoid the tax on Roth earnings?
Q. Will TSP allow me to purchase one annuity from MetLife and a second annuity from a different provider? The state I live in only insures annuities up to $250,000 and I’d like the remainder of my TSP balance to be insured by purchasing a second annuity from a different provider. Are there any strategies I could employ to accomplish my goal of insuring the entire TSP balance that I’d like to use to purchase these annuities?
Q. I am retired LEO, age 57, and I made a partial withdrawal of my TSP for a rollover to an IRA. Will I be able to use the remaining amount for a down payment for a home and close the account? If the withdrawal is not possible, would you provide guidance to obtain funds from the TSP for a down payment?
Q. I reached 70 1/2 yrs in 2014. I must start withdrawing my traditional TSP funds by April 1. I want to transfer the full amount (less than the RMDs for 2014 and 2015, plus 10% tax) to an existing ROTH IRA. A call to the ThriftLine informed me “there may be tax implications”. What might these tax implications be?
Q. I have read conflicting information concerning VCP to ROTH conversion and the five-year rule. Based on this information, there may be a difference between the funds converted and the interest income generated in the ROTH account. Can you explain how the five-year rule applies in each case? A. The five-year waiting period for the converted funds and the interest they produce will begin on Jan. 1 of the year of the conversion. Check page 71 of IRS Publication 590 for an explanation of the rules. You should consult a qualified tax adviser regarding the rules and how they apply…