Q. A client of mine retired from federal government after 16 years and took her employee contributions out of the retirement plan upon retirement. She is working for the federal government again and wants to buy back in to the pension plan for the employer portion of the 16 years she previously worked. Does she have to use after-tax dollars, or can she do a rollover from an IRA or other retirement plan? A. She must use after-tax dollars for the buyback.
Browsing: pension benefit
Q. My wife has contributed to her Thrift Savings Plan all her career and we will draw on it soon. We both have federal pensions and Social Security pensions that do not count toward income for purposes of the Social Security cap. If she receives her TSP in a lump sum, I know we have to pay taxes, but will that money be considered income for that year and offset our Social Security pensions, or is her TSP considered part of her retirement income? A. TSP withdrawals are not considered earned income.
Q. I wanted to know your thoughts over using a portion of my savings for a “fun” account. I am 57, retired from CSRS, debt-free with no children and a spouse who has a defined benefit pension that would cover her expenses independently. I have $120,000 in a Roth IRA; $100,000 in CDs; and $225,000 in the Thrift Savings Plan, 50 percent in F and G funds. The Roth has 50 percent in a health mutual fund, 50 percent in a financial mutual fund and earns about 6 percent annually. Why not take, say, $75,000 and put it in an account…
Q. I am 72. My wife is 62. I get $1,700 a month in pension and $1,700 a month in Social Security. My wife gets $5,800 in pension. We put $70,000 in a mutual fund three years ago. It is now $80,000. I would like to take out $20,000 a year. I have health problems. Good idea or not? A. You have the “idea” of spending money that you’ve saved and invested in mutual funds, and you want to know if your idea is a good one? That’s like asking if your idea to eat the leftover birthday cake is…
Q. I am a single, 57-year-old CSRS Offset retiree, mortgage-free, no car payment, no children and debt-free. I have enough pension to live on comfortably and still put away money into savings monthly. I have more than 30 quarters of Social Security credit. I have two six-figure IRAs that I do not plan to touch until required. My Thrift Savings Plan is approximately $400,000 and I have yet to touch it. I am perplexed about when to begin drawing money from my TSP, but I know that I will have to begin withdrawals by age 70½. Should I draw TSP…
Q. In IRS Publication 575 on page 33, they list an exception from the 10 percent penalty on withdrawing from the Thrift Savings Plan fund for qualified public safety employees. As a federal agent, if I retire in the year in which I turn 50, am I exempt from the 10 percent early withdrawal penalty based on the qualified public safety employee clause? IRS Publication 721, pages 17-18 lists a law enforcement officer as a qualified public safety employee. If this is the case, why do they not mention this when doing pre-retirement seminars? A. The exception only applies to defined benefit…
Q. I’m a FERS retiree, age 64, with a $36,000 annual pension. My spouse has a $40,000 annual salary. We have a rental property that brings us $24,000 a year. And we have a home mortgage balance of $500,000. Our living expenses so far do not require me to withdraw my $600,000 Thrift Savings Plan fund. I plan to live until age 85. As I approach age 70½ with minimum distribution, what is the best tax strategy for transferring the $600,000 from the TSP into a private investment account? A lump-sum rollover into a Roth account after paying the taxes? A calculated…
Q. I recently read your article, “Prepare now for possible hike in pension contribution.” 1. Can you respond with your thoughts regarding how proposed pension hikes would or would not affect federal employees with less than five years of service as of Jan. 1, 2013) who are subject to the 2.3 percentage-point increase signed into law by President Obama this winter? 2. How would the possible hike in pension contribution affect a CSRS employee who has over 41 years and 11 months of service? A. 1. With about half the increase I modeled for my article, I’d expect about the…
Q. Do you happen to have any articles about the pros and cons of paying off the mortgage in retirement? We had paid off ours. But we moved to downsize before selling the bigger house. So we took on a VA mortgage at a relatively low interest rate last November. When we sell the big house, we have two options: Keep the mortgage and invest all the money, or pay off the mortgage and invest the balance. I retire in January 2013, and our pension income will be half our current income. Is there a “calculator” to evaluate the choices? A.…
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…