Q. I have received several inquiries about establishing Voluntary Contribution Plan accounts with the Office of Personnel Management, funding the account and then rolling those voluntary contributions into a conventional Roth plan administered in the private sector once the employee has retired. I am a little skeptical about the prudence of this. It appears to me on the outside that this is simply a way of talking people into using the federal government to change the “color of money; read: launder” and then roll it into a Roth where a plan administrator will now make a fee on your hard-earned…
Browsing: retirement
Q. I am a 55-year-old Veterans Affairs Department firefighter covered under CSRS with 35 years of service. I am planning on retirement next year. What are my options with my Thrift Savings Plan account when I retire? Can I withdraw funds for college without a penalty? Can I withdraw funds and transfer into a new IRA without penalty? Do I only have one time to decide what to do with these funds once I retire — withdraw all and reinvest or take a monthly annuity? A. Since you are retiring during or after the calendar year in which you reached…
Q. I will be 59½ in August. I would like to make an in-service withdrawal from my Thrift Savings Plan. At this time, I have a loan out on my account. Do I need to repay this loan before I take an in-service withdrawal for the total amount in my account, and how much tax will I be charged for this withdrawal? A. You do not need to repay the loan before taking an age-based in-service withdrawal. The automatic tax withholding rate on these withdrawals is 20 percent unless you transfer your payment to another retirement plan or account.
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. Should I consider paying off the balance of my mortgage (approximately $300,000) using a full withdrawal of my Thrift Savings Plan upon retirement if the mortgage payment is more than the TSP annuity anticipated and the balance is adequate to make the payoff? A. I can’t tell you if you should, but if I were responsible for managing your retirement plan, I wouldn’t recommend it.
Q. I plan on retiring in 2014 but would like to leave my Thrift Savings Plan alone unless I need it or until I turn 59 (which would be 2015). I’m looking at around $180,000 to draw from. I think I would like to start with a small amount, say $500 a month, to see how that works until my Social Security kicks in at 66. Is there any problem adjusting the monthly amount I would want? A. You may adjust your monthly payment amount once each year, in January.
Q. I’ve been doing some estimates for retirement with the TSP calculator. I plan on leaving my money in G Fund after retirement, and for interest, I’ve been putting 3 percent. Is that a conservative enough amount? A. The calculator is unrealistic in that: 1. It assumes that a constant rate of investment return will be earned each and every year, like clockwork; 2. You can predict what this rate will be; 3. You know how long you’re going to live; 4. Inflation isn’t a factor. Each of these assumptions is absurd. I think that the calculator is, at best,…
Q. I am planning on retiring in December, but I will still have outstanding balances owed on my Thrift Savings Plan loans. Will they take that remainder out of my TSP money when I withdraw it? A. If you retire with an outstanding loan balance, the unpaid balance, plus interest, will be declared a taxable distribution. This money has already been deducted from your TSP balance, so it won’t be available for withdrawal if it has not been repaid.
Q. I am planning on retiring Dec. 31 at age 68 with 10 years of FERS service. I will be 69 on Jan. 18, 2013. What are my options regarding my Thrift Savings Plan account? Should I roll over to my Individual Retirement Account? A. Following retirement, you may withdraw your funds from the TSP, roll them over to an IRA, or leave them in the TSP and continue to manage them. You can learn about the details at www.tsp.gov. In general, I recommend leaving your funds in the TSP as long as possible to take advantage of the unique…
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.…