Q.I have heard that friends are having more taken out for federal tax on their IRA or annuity accounts.  Mine did not.  Does that mean I’ll owe money next April?  I thought all the Bush tax cuts were extended. A. Withholding and the actual tax you wind up owing are two different things. I can’t tell you whether or not you’ll owe money in April, but the more you contribute during the year, the less likely you are to have to pay later.

Q. I understand that the thrift annuity payment is for life — does that mean until death?  As a FERS retiree, will my Social Security annuity be reduced based on how much I have in my retirement fund (frozen CSRS) and/or thrift account? A. Is this a trick question? Yes, a life annuity means that payments continue, on a accrual basis, until the annuitant’s death, unless a survivor benefit option is elected at the time of purchase. In that case, the payments continue until the survivor dies, if later. Your Social Security benefit might be reduced by the Windfall Elimination…

Q: In the March 7th issue of Federal Times, on Page 20, there appears a TSP SNAPSHOT which has the following entry: Individual funds  C Fund March 3           $16.15 Year-to-date      6.18% Last 12 months    21.34% Am I really receiving a 21.34 percent return for funds in the “C Fund” for the last 12 months? I am able to get only 1% to 2% return on a CD for a year. The 21.34 percent just seems too good to be true! Am I misinterpreting what I see? A: The calculated rate of return was correct. Remember that this rate of return…

Q: I understand that the Thrift annuity payment is for life. Does that mean until death? As a FERS retiree, will my Social Security annuity be reduced based on how much I have in my retirement fund (frozen CSRS) and/or Thrift account? A: Is this a trick question? Yes, a life annuity means that payments continue, on an accrual basis, until the annuitant’s death, unless a survivor benefit option is elected at the time of purchase. In that case, the payments continue until the survivor dies, if later. Your Social Security benefit might be reduced by the Windfall Elimination Provision…

Q: I have heard that my friends are having more taken out for federal tax on their IRA or annuity accounts. Mine remain the same. Does that mean I’ll owe money next April? I thought the Bush tax cuts were extended. A: Withholding and the actual tax you wind up owing are two different things. I can’t tell you whether you’ll owe money in April, but the more you contribute during the year, the less likely you are to have to pay later.

Q: I retired from federal service Jan. 1, 2010, under CSRS. In April last year I received a full distribution from my TSP account. I live in Pennsylvania and am interested to know if I’m responsible for paying state tax on my full TSP ditribution. A: My review of the Pennsylvania rules leads me to understand that TSP income is not taxed if you are retired and at least 59½ years old when it is taken. You should consult a PA/CPA to be sure, however.

Q: If an employee has a TSP loan and decides to retire prior to the loan being paid off, can the person still select a payment option out to the TSP even though there is an amount owing to the TSP? And, if the person already took a one-time withdrawal, so that is not an option, does the loan have to be paid off before a TSP payout can be made? A: Yes, you may request a post-retirement TSP withdrawal if you have an outstanding loan. The loan will be declared part of your taxable distribution for the year.

Q: I am 65 and plan to retire next year. When I turn 70½, will the dollars I have in TSP at that time be automatically included in the Federal Tax “Required Minimum Distribution” (RMD) calculation? A: I’m not sure that I understand your question. The TSP will remind you before your withdrawals must begin, but you must initiate the withdrawals. The TSP will automatically calculate the distribution amount if you select monthly payments based on your life expectancy.

Q: I work for USDA. I will retire at the end of December 2012 as a GS-14, Step 7, $126,251 – FERS. I am taking full Social Security. I was born in June 1943. My monthly Social Security entitlement is about $2,350, and I have 25 percent taken out for federal taxes. I am investing in the L-2020 401(k) TSP fund. I plan to keep my money in the 401(k) after I retire. Is keeping my retirement savings in the L-2020 fund in retirement a good strategy? I figure the fund is diversified nicely with conservative and aggressive funds. I…

Q: When the Roth TSP is available in 2012, I already have Roth IRA with Scottrade. Can I transfer all my money to the Roth part of the TSP to take advantage of the low expense fee? A: While this is a good idea, the option to do so has not been offered yet. You’ll have to wait and see.

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