Q. I am in my early 20s and have just left a federal job. I am trying to decide what to do with my Thrift Savings Plan money. I’m leaning toward rolling it over to an IRA but do not understand where to start. Where do you get the forms to do this? Is it a good idea? (Cashing it out would have been my next option.) A. The best thing you could do with it is to leave it in the TSP and manage it there for as long as possible. In fact, if you have IRA, 401(k) or…
Browsing: 401(k)
Q. The Internal Revenue Service deferral limitation for 401(k) accounts is based upon a dollar limitation, which is the same for government and service members who contribute to the Thrift Savings Plan. For federal employees wanting to maximize their TSP contributions, this is a simple process on Form TSP-1: You merely take the current IRS limit ($17,000) and divide it by the number of pay periods (26) and you get the amount you should withhold in each pay period ($653.84). If you receive a step increase, or get promoted, or anything else that changes your pay, there are no effects…
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. Can a wife roll over her 401(k) distribution into her husband’s Thrift Savings Plan account? A. No.
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 invest the maximum in my Thrift Savings Plan L2030 account. What other monies can I move into my TSP account — e.g., mature CDs, ITF money from a deceased parent, bond dividends, etc.? A. You may transfer previously untaxed retirement account (IRA, 401(k), 403(b), etc.) balances into the TSP.
Q. Will you be allowed to withdraw the principal (not the interest earned) from your Roth TSP account after the five-year seasoning period and without any retirement age restrictions? Do the Internal Revenue Service’s rules on Roth 401(k) or a Roth IRA apply to Roth TSP? A. The early withdrawal penalty covers Roth distributions prior to age 59½.
Q. My husband has 15 years active-duty military and is working now as a NASA employee. It will cost about $20,000 to buy back his 15 years. Can we roll over money from our 401(k) into FERS and avoid penalties and taxes on that money? A. No.
Q: I have a question concerning the following paragraph from your Feb. 20 column in Federal Times: I find it disappointing that it appears that you will not be able to manage, or withdraw, money selectively between the two options. Your contribution allocation and any interfund transfers you direct will apply to both options. Any withdrawals will be taken, pro rata, from both options. You may, however, split a rollover distribution between traditional and Roth IRA accounts. Specifically, I am puzzled by the statement in the second sentence. As I understand the general concept with “tax deferred” individual retirement accounts…
Q. Last year, I took out $3,000 from my 401(k) and paid my 20 percent penalty. This year, I went to do my taxes and expected to pay the additional 10 percent penalty of $300. I do my taxes on freetaxusa.com, and my refund was supposed to be $1,800 after I entered my W-2. But as soon as I entered my $3,000 distribution, it knocked it down to $1,300. I have no other factors involved as far as why I would be charged more than the initial $300 I expected. Do you think there is something wrong and they are…