Q. I will have about $1.5 million in my Thrift Savings Plan when I retire. I am planning on getting an annuity with those funds. Because it is part of my retirement funding, will this be counted against me with respect to the Social Security earnings limits? In other words, will I have to pay additional taxes on what I have earned in my retirement account because my income will be in excess of the Social Security earnings limits? A. The income will not be counted as earned income for means testing but will be counted as income for determining the…
Browsing: Social Security
Q. I am 65 years old and will collect my first Social Security retirement check this month. I have been employed by the federal government for the past nine years; therefore, I have been enrolled in the Thrift Savings Program. If I retired today, my TSP benefit would be approximately $400 a month. Will my Social Security or TSP benefit be penalized because I am drawing benefits from both accounts? A. It is possible that the taxes you owe on your SS benefits could affected by your annual income, including TSP distributions. See www.irs.gov/uac/Are-Your-Social-Security-Benefits-Taxable%3F for more info.
Q. I am 55 with 13 years of service. My wife is three years younger than me and will work three additional years — until I am 65. My Thrift Savings Plan balance is approximately $200,000, and I hope to retire at 62. My wife and I have other investments of approximately $300,000, totaling $500,000 (mostly 401(k), but approximately 20 percent Roth). I understand that when I am retired and after we reach the “threshold,” I will pay one of every two dollars made. Is this true for dollars dispersed from Roth accounts? I understood them to be “tax-free.” A.…
Q. I am looking to establish residency abroad after retirement, either in France or Germany. Is there any guidance on direct deposit of FERS and Social Security annuities, and Thrift Savings Plan distribution, to foreign banks? A. Direct deposits from your TSP account can only be made only to financial institutions in the United States.
Q. My wife was RIFed in 2008 at age 48 with 28 years of service with a $7,000 Thrift Savings Plan balance and was placed on CSRS discontinued service retirement. She was re-employed by the government five months later with a different agency. Because she is a re-employed annuitant, she can no longer contribute to TSP and is covered by Social Security’s Old Age, Survivors and Disability Insurance only. Emails and telephone calls to TSP have proved less than helpful; TSP has advised her that the only action possible is to leave the fund as is. We both wanted to verify…
Q. I will be retiring Jan. 31 from the Postal Service. In May, I will receive $10,000 and in May 2014, I will receive $5,000. Can this compensation be used to fund an IRA in years 2013 and 2014 even though I will be retired and not working another job? Is this considered earned income? I know federal and state tax will be deducted. I don’t know yet if Social Security will be deducted, too. What are your thoughts on this? A. I believe that these payments are considered retirement income, and, therefore are not considered the basis for IRA contributions, but you should consult…
Q. I have 21 years of federal service including four years of military time. The redeposit is about $6,500. I will be eligible for Social Security at 62, and the reduction to my annuity will be about $250 a month. In your opinion, would it be advisable to take this money from my Thrift Savings Plan account to pay the redeposit? The break-even point is about 2½ years. What factors should I take into account? A. The answer depends upon what retirement system you’re under, whether or not you have dependents who will be relying on a survivor annuity, your tax…
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. My husband and I are both retiring soon, he under FERS and me under CSRS. His income will be made up mostly of Social Security, while mine will be mostly CSRS. A full annuity for him would cost $425 a month. Does it make sense to elect this annuity given the cost? Would a term life insurance policy be a better alternative? I need to put the paperwork in this week. A. There is no universal answer to this question, but if in doubt, the safe bet is to elect the full survivor benefit for your spouse. To answer this question properly would take…
Q. What factors determine whether it is better to pay insurance premiums with pretax dollars or waive that and pay with after-tax money? My thought is that by paying with after-tax money, taxable income is increased, thereby increasing the Social Security entitlement. How do you determine if that is more beneficial than the reduced tax liability now? A. The answer depends on your circumstances and a number of assumptions about the future. The issue is discussed on the Office of Personnel Management website at www.opm.gov/insure/archive/health/pretaxfehb/qanda/23.asp.