Q. I will be 59½ in August. I would like to make an in-service withdrawal from my Thrift Savings Plan. At this time, I have a loan out on my account. Do I need to repay this loan before I take an in-service withdrawal for the total amount in my account, and how much tax will I be charged for this withdrawal? A. You do not need to repay the loan before taking an age-based in-service withdrawal. The automatic tax withholding rate on these withdrawals is 20 percent unless you transfer your payment to another retirement plan or account.
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Q. I will be retiring June 30. I contributed $100,000 to my Voluntary Contribution Plan account between September 2010 and the present. I plan to roll over the $100,000 to my Roth IRA upon retirement; have the Office of Personnel Management withhold 20 percent for tax on the interest that it earned; then roll over the remainder to the Roth IRA also. Is that doable? A. The accrued interest will be considered a conversion. I believe that is doable, but you should check with your tax preparer to be sure.
Q. I’m 57 years old, started with the Postal Service in June 1987, bought back five years and nine months of military time. What would be the difference in benefits between retiring if a VERA is offered and retiring before a VERA is offered? Would I be penalized on my Thrift Savings Plan? Can I get the Social Security supplement? Would I be able to collect Social Security supplement either way? Mike Miles: Since you’d be retiring during or after the calendar year in which you reached age 55, you would have access to your TSP account without incurring the…
Q. I am a FERS employee earning $118,000 per year. My sister is a dental assistant earning about $30,000 per year. (She’s also married and lives in a state with a much lower cost of living, while I’m single.) This question involves inheritance of our parents’ retirement accounts, and I offered our salaries because our tax obligations are vastly different. Our father has a TSP account worth approximately $110,000. Our mother has a 401(k) worth approximately $90,000. Both are retired, and both are very ill with terminal cancer. We’re wondering if our parents should each convert their retirement accounts to cash…
Q. I am 62, retiring from the Postal Service after 45 years of government service and wish to take a set amount of money from my Thrift Savings Plan account on a monthly basis. If I should I pass away prior to my wife becoming age 59½ years of age, would she have to pay the 10 percent penalty? A. No, the penalty does not apply to distributions made on account of the death of the account holder.
Q. What happens to the FERS benefits and Thrift Savings Plan account if a former federal employee renounces his U.S. citizenship? A. Renouncing U.S. citizenship, on its own, does not affect the ability to maintain and manage a TSP account.
Q. Should I consider paying off the balance of my mortgage (approximately $300,000) using a full withdrawal of my Thrift Savings Plan upon retirement if the mortgage payment is more than the TSP annuity anticipated and the balance is adequate to make the payoff? A. I can’t tell you if you should, but if I were responsible for managing your retirement plan, I wouldn’t recommend it.
Q. I’m thinking about going to do a GS job after my four years is up in the military. If you go from military to GS, can you keep adding money to your TSP? A. You will begin a civilian TSP account as a civilian employee.
Q. Will it be possible to convert a normal Thrift Savings Program account to the new Roth option? I understand that the taxes due would have to be deducted, but I’m curious as to whether or not it is even possible. A. This is not allowed.
Q. My mom, who doesn’t know English, turned 70½ on Aug. 4, 2011. She has IRAs at two different places: Vanguard and Bank of America. My mom has already satisfied her 2011 Vanguard required minimum distribution before April 1, 2012, because it was her first RMD. The Vanguard 2011 RMD was calculated by Vanguard and mailed to my mom, by the way. Was she also required to take a Bank of America RMD? If so, oh no! What’s the best way to proceed? A. In general, an RMD must be calculated for each IRA, and the total RMD for all…