Q. I am separating from the military in January 2014. From there, I will be pursuing my education. I will be 60 in 2042. My Thrift Savings Plan is 100 percent G Fund. I stopped my TSP contribution and started the Roth TSP because I like the idea of not paying tax when retirement comes. I am aware that the account needs to be in place for five years and can only be withdrawn at age 59½, and that the money is deducted from taxed income. Is this a wise decision? Since my traditional TSP can’t be transferred to TSP…
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Q. I am covered under CSRS. Can I still open an external Roth account and contribute the $6,000 maximum (plus catch-up)? If so, how would contributing to the Roth TSP interact with contributing to the external Roth? A. The limits for the two are separate, but your eligibility to contribute to a Roth IRA depends upon your tax return for the year. If your income is too high, your Roth IRA contribution eligibility will be phased out. There’s a worksheet in IRS Publication 590 that will help you determine your eligibility.
Q. I’ve been retired a couple of years now and I’ve transferred the money I had sitting in the G Fund to one of the L funds. I chose the L 2020 fund, mainly because I’ll turn 70 in five years and will be forced to start withdrawing the required minimum distribution. I’ve read that you suggested putting money into the L Fund that closely corresponds to one’s life expectancy. Does that mean how long I plan to live, or is that determined by a doctor or some other expert? A. If you’ve had a full physical exam within the…
Q. It is my plan to continue working past age 70½, which will allow me to not take minimum distributions until after I separate from service. However, I have found nothing that speaks to continuing contributions beyond 70½. I would like to continue contributing if possible. What can you tell me about that? A. You may continue to contribute up to the usual limits until you separate from covered service.
Q. I appreciated your Feb. 4 article concerning the advantages of the Thrift Savings Plan vs. more costly private products. I am unclear, however, about the options (and their advisability) when it comes time to retire from federal service. Recognizing that rules allow distribution without penalty at 59½ and require some distribution from any IRA at 70, is continuation in the TSP an option which would allow the retiree to access the account as desired, or must the TSP account be moved to a private instrument? A. I have written about this topic on more than one occasion. You may…
Q. I am a federal employee under CSRS and over the age of 50. I understand that the 2013 contribution limit for TSP is $17,500 plus an additional catch-up contribution of $5,500, for a total contribution limit of $23,000. My question concerns contributions also made to a Roth IRA account outside the Thrift Savings Plan. For the general public, I understand if you are under the Internal Revenue Service income limit, you can contribute $5,000 plus a $1,000 catch-up contribution to a Roth IRA. I am under this income limit. Therefore, can I contribute the $6,000 to my Roth IRA…
Q. My question regards Required Minimum Distributions and how this Internal Revenue System rule relates to an annuity purchased with IRA funds. If the annuity in question has fixed payment amounts that are less than a calculated RMD, the funds are not available to the account owner for distribution to meet the RMD rules. Does this scenario appear to be a credible reason for not meeting the RMD rules and an exception that IRS should allow? A. We don’t answer questions about IRAs here, but I will pretend you asked about the Thrift Savings Plan, since the answer is the same…
Q. I am a retired CSRS employee. What taxes, if any, do I owe New York state on annual distributions? The initial contributions were not taxed by New York. A. Your distributions are considered ordinary income for tax purposes. They should be reported as such on your federal and state tax returns, unless your state provides a special exemption for this type of income. If you want specific guidance for completing your tax return, you should seek the help of a qualified tax preparer.
Q. I am 22 years old with four years of service and would like to withdraw early from my Thrift Savings Plan. I know I will be charged 10 percent in early withdrawal fees, but how much will the “applicable taxes” be? I am an Alaska resident, if that makes any difference. A. The only way to know what you’ll ultimately pay in taxes is to prepare your tax return for the year of the withdrawal.
Q. When I prepare my taxes, do I add my Thrift Savings Plan withdrawal amount in with my total earnings for the year? If not, where do I put it? A. Sorry, but we don’t prepare tax returns at Ask the Experts. That’s a question for your tax preparer.