Q. What are the negatives and positives as far as changing a Thrift Savings Plan account to a Roth IRA? A. The negatives are that you have to pay taxes now and that you’ll likely incur higher investment costs, greater investment risk, or both in a Roth IRA. The positives might include an advantage if your tax rate rises sufficiently between the time you convert and the time you ultimately withdraw your money from the Roth IRA.
Browsing: Roth IRA
Q. I know you can transfer a Thrift Savings Plan balance directly into a Roth and pay taxes on the entire amount, which are due at time of tax filing. This causes a tax burden that may be difficult to cover with personal funds. However, is it possible to withdraw the funds directly into your checking account and within the 60-day window, still roll over these funds into the Roth, but at a level that is net of taxes? This would allow a portion of the TSP withdrawal to cover the ultimate tax liability? A. This is a question for your tax…
Q. Can you leave a percentage of your Thrift Savings Plan account to grandchildren’s 526 college fund? A. This is really a question for an estate planning attorney, but it seems to me that this is like asking if you can designate a person’s Roth IRA as a beneficiary — and the answer to that questions is no.
Q. To preface, I am a twenty-something Defense Department civilian who will be furloughed the 11 days if Congress does not act. In June, I will have a $5,000 windfall from CD at maturity. I wanted to know the best possible option for this money. So far, I thought of fully funding my Roth IRA and saving the rest, adding to my emergency fund savings (which stands at about $25,000), funding my Thrift Savings Plan, or just investing in a taxable account (mutual fund, ETF, etc.) What do you recommend? A. Your question is like telling me that you’re flying an airplane…
Q. I am a fully vested CSRS employee with the Environmental Protection Agency for 33 years at age 55. I have received my numbers, but I missed my first date to retire. How long does it take to receive my first full check? Should I take all of my Thrift Savings Plan out at once; leave about $10,000 in and roll it over to a Roth IRA; or leave it in the TSP? Is there a counselor at TSP to speak with about taxes and IRAs. A. You should leave your money in the TSP for as long as possible…
Q. Based on a reading of Internal Revenue Service Publication 721, it appears to say that since the CSRS and FERS retirement systems are considered “eligible retirement plans” you could roll over a distribution (including a regular annuity payment) into another IRA and defer the taxes, or into a Roth IRA and pay the taxes immediately. If this is the case, the normal IRS limitation on contributions to IRAs and Roth IRAs are bypassed. Am I reading this correctly? A. From IRS Publication 721: “Distributions eligible for rollover treatment. If you receive a refund of your CSRS or FERS contributions when you…
Q. Upon retirement, I’m considering transferring a portion of my Thrift Savings Plan balance in monthly payments directly into a Roth IRA. Since my TSP is pretax, I understand that taxes will need to be paid on these funds upon conversion to a Roth. I am in a state with no income tax on federal pensions and distributions from the TSP (North Carolina) and want to be sure that this transfer from my TSP to the Roth will be considered a TSP distribution for tax purposes, and therefore, subject to federal and not North Carolina taxes. Does the Office of Personnel…
Q. I would like to roll over my Roth IRA into my Roth TSP. Do you see the government allowing this some day? A. It’s possible, but I can’t handicap the odds. While it would be nice to be able to do this, it shouldn’t be significant in the big picture. If it is, you’re doing something wrong. You should focus on making sure that your Roth IRA is as close to the Thrift Savings Plan in its low cost, simplicity and diversification as possible.
Q. I retired in 2011 before the Roth TSP was created. Can I roll over a private Roth to the Roth TSP? A. No.
Q. I am a fully vested CSRS employee with the Environmental Protection Agency for 33 years at age 55. I have received my numbers, but I missed my first date to retire. How long does it take to receive my first full check? Worst-case scenario? Best-case scenario? And is there any way to speed up processing? When will I receive my annual leave payment? Will it be immediate in one lump sum without taxes since I already paid taxes on my leave? Should I take all of my Thrift Savings Plan out at once or leave about 10,000 in and…