Q. I am 61½ years old. I want to pay my mortgage off. I am losing my contract job and need to lower my debt. I have saved up all but $30,000. If I withdraw that from my Thrift Savings Plan, how much in federal taxes will I have to pay? Would it be better to get a personal loan? A. Your TSP withdrawal will be added to your income for the year and taxed at your marginal tax rate for the year. You’ll need to prepare a pro-forma tax return to estimate the amount you’ll owe. It’s impossible to say,…
Q. I will be taking voluntary early retirement July 31. I have plans to take my money out of TSP to pay off bills and buy a home. Would it be better to wait until next year to pull out since I will be in a lower tax bracket? A. While it’s nice to reduce the tax liability on your withdrawals, the size of any advantage you’ll enjoy from waiting will depend on how much income is ultimately exposed to lower tax rates. Once the potential tax benefit from delaying the withdrawal is determined, it needs to be weighed against…
Q. I am 59 years old and will have 38 years civil service (FERS) in October. I hope to work until age 62. We went to a financial adviser when my husband retired two years ago, and he invested his 403 in an insurance fund and another fund recommended by this adviser. It has earned around 5 percent. The adviser now wants me to withdraw most of my Thrift Savings Plan at 59½ and invest with him. I know 5 percent is pretty good, but it will be locked in for several years. He also recommended I purchase whole life instead of…
Q. Can I roll over the balance of my Thrift Savings Plan loan to an IRA at retirement and keep making loan payments? I am trying to delay the impact of the entire balance being counted as income on my 2012 income tax (assuming I am retiring in August 2012). A. No. Loans are not permitted from an IRA.
Q. I retired the end of July 2011. Since then, companies are coming out of the woodwork requesting that I invest my Thrift Savings Plan funds with them because “keeping it in the TSP will not allow growth due to the fact that I am no longer contributing.” But I am hesitating to do anything with it because once I hear their fees, it scares me. I don’t expect to need the money and would like it to grow into a nice inheritance for my daughter. I have about 90 percent in the G Fund and the remaining 10 percent divided…
Q. My sister retired in 2010 and most likely will not move her Thrift Savings Plan into an IRA and begin withdrawals until she’s required to in 2015. In the meantime, she has awarded percentages of her TSP to children and friends. If she dies before 2015, I know that the beneficiaries will have to notify TSP. It’s my understanding that the TSP beneficiaries will each have to start new IRAs to receive their portions. I don’t think there’s any way for the beneficiaries to receive a lump-sum payment, unless they pay penalties. Am I correct? And this is true regardless…
Q. I’m a Postal Service worker with 33 years of service under CSRS. Can I make contributions to Thrift Savings Plan that exceed the $17,000 maximum and $5,500 catch-up contributions? A. No. You may transfer money into TSP from an eligible IRA without limit, however.
Q. I may be in the wrong retirement system (CSRS). If I am, are there any companies that can guide me to decide between CSRS offset and FERS under the Federal Erroneous Retirement Coverage Corrections Act? A. Yes. I have capabilities and experience in this area (I provided decision support in one of the largest FERCCA cases on record) and will be happy to discuss your situation with you. You may contact me directly through www.variplan.com.
Q. Have you heard anything regarding an increase to the maximum Thrift Savings Plan annual contribution ($17,000)? A. You should expect the TSP deferral limit to track the 401(k) deferral limit, which is indexed to inflation with a $500 minimum increase. Any increase for 2013 won’t be announced until later this year, usually in October.
Q. During a retirement seminar, I was told that federal employees who retire during the year they turn 55 but before age 59½ have a one-time opportunity to withdraw funds from the Thrift Savings Plan without paying the 10 percent tax penalty. Is this correct? If so, how should this withdrawal be reported to the Internal Revenue Service so that the penalty is not assessed? I am a retired federal law enforcement officer, which may or may not be relevant. A. This is bunk. If you retire during or after the calendar year in which you reach age 55, any and…