Q: My wife and I are retiring from federal civil service effective Sept. 30 and want to continue adding money to individual retirement accounts we have had since before our civil service careers. We will not be employed after leaving the federal government. What is the contribution amount we can make to an IRA annually? A: If you have no earned income, you can’t make IRA contributions.
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Q: I retired from the U.S. Postal Service on Oct. 31 and received a $10,000 incentive payment in December that was counted as part of my 2009 earned income. As part of the incentive package, I will receive another $5,000 this October. This has nothing to do with my retirement annuity, so will it again be counted as earned income for 2010? If so, I will be able to contribute it to my Roth IRA, correct? A: This is really a question for your tax preparer, but I expect that income to be reported for tax year 2010.
Q: I am retiring next month and am not interested in assuming risk in my retirement funds at this time. Would be best to roll over Thrift Savings Plan funds into an Individual Retirement Account, or should I leave the money in the TSP? I currently have 50 percent of my money in the G Fund and 25 percent in the C and S Funds. A: Your interests will be best served by leaving your money in the TSP as long as possible.
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…
Q: I am a 44-year-old Federal Employees Retirement System employee. I have a financial planner who wants to explore withdrawing part of my Thrift Savings Plan and rolling it into a Roth individual retirement account to take advantage of the two-year payout of taxes. I told the financial planner we only have two options for TSP withdrawals: One is for hardship, and the other applies if you are more than 59 1/2 years old. Because I do not meet either requirement, it appears to me that I cannot make an in-service withdrawal. Are there other options for in-service withdrawals? The…
Q: Regarding the Jan. 26 posting on “Forced into choosing TSP withdrawal options,” your final comment states: “An alternative would be to roll over your TSP to a low-cost IRA and then withdraw money as you please.” How is that possible if he is already 70 1/2. I’ve understood that an IRA is not available to purchase if you are already 70 1/2. A: You may roll your TSP balance to an IRA at any age.
Q: I will be retiring in couple of years. Will I be able to contribute to my Thrift Savings Plan after retirement? If so, is there any limit on contributing? If not, how will my TSP grow if I am not able to contribute? A: If you’re not receiving a federal paycheck, the only way you can contribute to the TSP is through a transfer from an eligible IRA or retirement plan account.
Q. I am a retired federal employee. I was forced to retire at age 51 due to some health issues. I was a wild land firefighter so I had the luxury to retire at a younger age. I still have my TSP, which has done very well in the past two years due to dumb luck and a bit of forethought. My question is; After retirement can I roll IRA money over into my TSP account? A. Yes, as long as the money you transfer was not part of a nondeductible contribution.
Q. Can I add lump sums of money to the TSP from other IRA sources? I am a current federal retired employee. A. Yes, as long as the money does not include nondeductible contributions or other basis amounts.
Q. Could you provide your opinion about the pros and cons in transferring IRAs into the TSP, or keeping them separate? I understand that the costs are much less in the TSP. However, withdrawal options are more flexible in IRAs, and IRAs provide another diversification capability. A. The pros are low cost, the G Fund, simple and efficient design, ease of management and superior risk-adjusted returns. The con is limited withdrawal options. The diversification possibilities in an IRA are largely irrelevant, since the TSP’s funds adequately cover the investment world. What most people call diversification is actually concentration. The TSP’s…