Q: I am a Civil Service Retirement System retiree. What happens to my Thrift Savings Plan account after my death? My notes from a retirement seminar 10 years ago say that if my spouse is listed as my beneficiary, she may move my TSP funds into her individual retirement account with no tax or penalty. If my children are listed as beneficiaries they do not have the same option, and in most cases the TSP funds are fully taxable. Is this still correct? A: Your spouse may transfer the balance to an IRA and avoid current taxation or may, under…
Browsing: Individual Retirement Account
Q. I’ve read the latest article from you, Mr. Miles and I have a question. I am a FERS/LEO employee and I max out my TSP contributions. Can I contribute to an outside brokerage IRA (I meet the Roth requirements) and if so, what is the cap for that yearly? A. Whether, or not, and how much you may contribute will depend upon your age, marital status, income and possibly other factors. Search the Internet for “IRA contribution calculators” and pick one from a reputable website to see where you stand — or check with a CPA.
Q: You answered a question in March about a “special rule” that allows for a tax-free transaction if someone split a traditional individual retirement account, converting some into a Thrift Savings Plan account and the rest into a Roth IRA. Please tell us the special rule so we have it when questioned. Also, can a retiree do this? I would convert my (pre-tax) earnings in my traditional IRA to TSP and then roll the basis into the Roth. A: You’ll find the information you’re looking for on Page 23 of IRS Publication 590. If you’re not sure about how to proceed, you…
Q: My husband and I want to convert all or a portion of our traditional individual retirement accounts into Roth IRAs in 2010. Our contributions have been nondeductible, and our IRA accounts are about double the investments we have made (value versus basis). So, we will be paying tax on the earnings. Then I thought about our Thrift Savings Plans. Are these considered IRAs for the purposes of this conversion opportunity? I read that the IRS will consider all IRAs; you can’t pick and choose among or within our IRAs regarding the conversion, but I certainly would not want to…
Q: Since I’m not allowed to deposit my lump-sum annual leave check into my Thrift Savings Plan account, where’s the next best place to put it? Will this amount be considered part of my 2010 income regardless? A: Generally, I prefer the following order for retirement savings deposits: TSP, deductable individual retirement account, Roth IRA, taxable brokerage account. Your income will be taxable in the year in which you constructively receive it.
Q: I am a federal employee with $60,000 in my nondeductible individual retirement account. I plan to convert it to a Roth IRA this year. I also have $120,000 in my traditional IRA which I do not plan to convert to Roth this year. To avoid the Roth conversion aggregation rule, my plan is to roll the $120,000 into my Thrift Savings Plan account before converting my nondeductible account to a Roth IRA. This way, the $120,000 will not be subject to the Roth conversion aggregation rule this year. Is this a valid way to avoid the rule? A: I…
Q: I joined the federal government more than three years ago. Can I roll over money from my Individual Retirement Account into my Thrift Savings Plan account? A: Yes, as long as long as your IRA doesn’t contain basis — that is, money that’s already been taxed.
Q: I have accumulated nontaxable (according to the Office of Personnel Management) retirement deductions that will be refunded to me shortly. I would like to roll this entire refund into a Roth Individual Retirement Account, but the “rollover information” letter they sent me is unclear. It states that I am permitted to roll over certain benefits into an IRA, but there is no mention of a Roth IRA. It also says that I can roll over the nontaxable amount into an IRA, but that I need to track the taxable and nontaxable ammounts. Because the entire amount is nontaxable, can…