Q. Do lump-sum Thrift Savings Plan withdrawals (either partial or full) that are made after retiring from FERS or CSRS count as wages for the Social Security earnings test? I found lots and lots of stuff saying TSP does not count as wages, but then also found something on the Social Security website that reads, “a Federal thrift Savings fund is treated as a trust in section 401(a) of the IRC. Therefore, employer contributions to your TSP are not wages, however your elective contributions to the fund are wages.” A. What you’ve read is saying that your TSP payroll deferrals…
Q. I am a CSRS employee who is considering retirement in 2013. I have a Voluntary Contributions account and also contribute to the regular Thrift Savings Plan. If I open a new Roth TSP account, would I be able to roll over my Voluntary Contributions account into the Roth TSP at retirement? A. [The following is a corrected and updated response to the question.] No. The Internal Revenue Code permits designated Roth accounts to accept transfers or rollovers only from another designated Roth account. Roth TSP balances are designated Roth accounts (or are treated like designated Roth accounts). The VCP is…
Q. Can you recommend some funds where a retiree could put his money if he is not a federal worker? A. Except for the G Fund, which is a cash equivalent that can’t be matched outside the Thrift Savings Plan (use a money market fund or equivalent interest bearing security with no risk of loss), the other four TSP funds are based on widely available indices. The C Fund is based on the S&P 500 Index, the S Fund on the Dow Jones U.S. Completion Total Stock Market Index, The I Fund on the Morgan Stanley Capital Europe, Australasia, Far…
Q. I am four years away from retirement at the Postal Service. However I have Parkinson’s disease, and I don’t know if I can hang in there. Any advice on whom I can contact regarding my options and what is best? Disability or trying to hang in there until 2016? A. Continuing to work will produce a better financial result. The real question is whether the financial improvement is worth the suffering, and only you can make that decision. I can show you what the additional work will mean to you in terms of your lifetime standard of living. Visit…
Q. I am a FERS employee who did a one-year-and-one-day residency (366 days) at the Veterans Affairs Department. During this residency, I was a full-time (40-hour-a-week) employee receiving benefits (health care, annual leave, sick leave, etc.). However, I did not contribute to FERS or the Thrift Savings Plan during this year and my “term” of employment was allotted for only one year. After the residency, I was hired as a full-time employee at VA contributing to the FERS pension, and I still continue to work in the VA system. 1. Does this one year of residency count as a year of…
Q. In a May 6 column, you recommended moving my traditional IRA to my Thrift Savings Plan. Why? I am getting good performance from my traditional IRA portfolio. I am planning to retire between the end of this calendar year and the end of 2013. Tax rates are likely to increase next year. What will be my tax consequences of making this move this year versus next year? What are the consequences of waiting until after I retire to make this move? A. The cost of investing is lower in the TSP, so the expected rates of return are higher than…
Q. If I contribute to the new TSP Roth, would I still receive the agency matching contributions? A. Yes, but the agency contributions go into your tax-deferred account.
Q. As a federal law enforcement officer facing mandatory retirement in 2013, I have been looking closely at my Thrift Savings Plan withdrawal options. When I retire and I leave my complete TSP balance in the G Fund, can I request withdrawals whenever I want and for whatever amount I want? I see that there are options for setting up a recurring amount each month or year, but can that be changed to month to month or whenever it is needed? For example, because receiving my full retirement pension amount in a timely manner will most assuredly not happen, would…
Q. Three years ago, I let myself be persuaded to withdraw 50 percent of my Thrift Savings Plan and place it in a private qualified retirement account. I did this at age 61, and this was my one-time withdrawal, so there were no penalties. I regret doing this. Before I retire, can I transfer this money back into my TSP without any issues? The other option is to use this private account to purchase a fixed annuity and draw off of it during the first years of my retirement thus leaving the other half of my savings (in Thrift) alone…
Q. You made the following statement in a recent column on common mistakes regarding retirement: “Think paying off your mortgage in retirement is important in achieving the highest standard of living possible? It’s probably not.” Why? I’ve always thought the opposite — that you should have your mortgage paid before you retire. Can you share your thoughts on this subject? A. You’ll find a transcript of a column I wrote on the subject here: http://www.variplan.com/uploadedDocuments/1277733522Carrying_mortgage_into_retirement_can_pay_off.pdf. Basically, the reason is that paying off your mortgage can tie up funds that you may need later to pay your bills — the bills for your…