Thread: Retirement Planning

I certainly wouldn't roll my funds out of TSP to an IRA type account. I've always read that the costs of maintaining an account, manager fees, etc. out way the benefits. Heard the paper work is outlandish also!
Just My

Wonder Woman wrote:

I certainly wouldn't roll my funds out of TSP to an IRA type account. I've always read that the costs of maintaining an account, manager fees, etc. out way the benefits. Heard the paper work is outlandish also!
Just My

It is a good idea... However I would like to raise this issue to you WW... I am not really privy with your status whether you are single, married, with children etc. etc... However, I can tell you that if you are married with children, rolling it over to a traditional IRA (and later to ROTH IRA) is a better choice. Especially for someone like yourself that have a portfolio that could easily encompass $1 mil is something to think about.It is unfortunate thatmany of us thinks about our current investment as isright now but we also have to think aboutthe future. IRS is hard to fight when you are dead. If not done correctly, you canloseeverything to IRSwithout any of your love ones gettinga penny of the hard earned money that your worked for throughout your entire life.

I am not saying that leavingsomeone's TSP account intact after retirement is a bad idea. In fact, I plan to do the same. However, I also plan an exit of transferring my TSP to traditional IRA then to ROTH IRA.I know that we always say that we plan to livelonger after we retire and leaving it to TSP will allow us to play the market and hopefully makeour retirement grow even more. Butnobody can tell me on this board that they know when are they going to die. And because of this, we need to be concern about the love ones who will inheritthe money that we worked so hard for.

Grandma suggested a book by Ed Slott (?) in one of the topics within this board. I urge people to read that book... It is not only a good read but also an informative one. For me, I would like to be able to pass on my TSP funds to my kids while at the same time letting the money grow even more. I also hope thatwith proper planning, they can then passit on to their children as well.Leaving your retirement in TSP without a proper exit could causeyour children and their children not to take advantage of tax deffered and reinvesting compounding interest thatonly IRA could offer.

I would like someone to answer this question I am going to post with hope that people will think about estate taxes... If you have a million dollars now in TSP vs. traditional IRA, and you die a year from now. How much of that money do you think you are going to pass on tax deffered to your children or love ones (besides spouse) and to their children for the next generation. Imagine the possibility of passing your hard earned money through generations is more than enough for me to take the risk of transferring my TSP to a traditional IRA (and later to a ROTH IRA). If you know the answer to my question, please put it in excel worksheet and attach it here so that people can see the difference. For the sake of argument, lets say you are 60 years old, your spouse is 65, and your 2 children are 20 and 25 years old... Thanks...

P

As usual Pyriel your contribution is generous. I was just trying to address Spaf's question and state what I have determined is best for me. As soon as I finished writing it I realized that all the 'what if's' were going to follow - so let's just for this thread, this time, for Spaf's sake, stick to Spaf's question, needs and situation.
And please don't get carried away with the million $$$ thing for me - I'm no where near that, nor will I ever be. I really don't like to repeatedly strut my stuff, nor do I like it when others repeatedly strut theirs.
IMHO

Sorry, didn't mean to offend you. My post is merely to increase level of knowledge and discussions with our readers. I did agree with your plan and had said that I will most likely do the same (with a little variation).I really do like seeing people here mention what they have for it tells me that these are the people that we need to be listening to and reading their advice since they've been there and done that.

Get carried away sometime, to the point that I don't watch what I write. Need to tell myself to be more carefulso others maynot perceive it the wrong way. Now about your fonts... Could you make that a little bigger. My age is catching up to me and my eyes are not doing too well. ThanksWW... Here is a hug from me to you... P

Pyriel, you did not offend me in any way.
Gee, I wish I knew what the problem with the fonts is. What I see on my screen is your font is smaller than mine. Let me f/uthis discussion in the Problems Category.

What's wrong with 50/50? :^

The main difference is that with ST you have sooooooooo many more options. The fun part, and let's face it don't we all wanna have fun when we retire, is putting a little into a developmental company and watching it take off. Of course, it doesn't always work. :shock:

Then again, TSP has that new "L" fund coming out and so you can just give them your money and they can make you rich.........er..........:P

Good luck,

M_M

I have about a decade to go before I retire, however, I think I will probably keep most or all in TSP. I can easily change allocations, daily if I choose. There is no assessed cost per transaction, and the management fees are extremely low, as funds go.

So, my only draw back is limited choices. However, the choices I have seem to offer enough potential to accomplish my basic goals. Also, I understand the funds pretty well, which is of some value in it's own right.

If the daily deadline ever gets moved to the end of the day rather than the middle, I will really be pleased. Theremay be more fund options in TSP as time goes by as well, like a REIT and maybe some addittional international funds.

In any regard, good luck and good fortune...

Spaf,

I've been thinking about your retirement question on and off for a few days - hate to rush into giving free advise, especially if it's of limited value.

The first thing you have to do is go back to square one - and consider how much you will have coming in yearly that you can't control. That figure is what sets your AGI -adjusted gross income - that is your tax bracket. Everything else you do is impacted by that tax bracket- no way out of it as long as you have a defined benefit retirement program. You will get that check every month as long as you live. Depending what options you select for payment as well as your primary beneficiary selection will all impact the end amount. Generally speaking the least amount you take the lower the tax bracket. An example would be covering your sp[ouse for her remaining life -if she happens to be younger you will be forced by default to take a smaller amount.

At some point you will apply for social security - the longer you can wait the greater the amount provided. This money is added to your AGI.

If your wife has her own retirement plan - that may be more family money you cannot control- it all adds up to either help you or hurt you depending upon you future plans.

Capital gains are another option to consider. They are generally taxed at 15% unless you have maneuvered your fiscal situation into the 15% tax bracket which is AGI of $56,800. Capital gains are then taxed at 5%.

The TSP could continue to provide valuable income that is deferred. Depending upon how aggressive you might want to invest the opportunity is wide open I think for several years going forward even if the Fed ends up engineering a shallow recession. I think they will stop shortly and we'll have an economy that is slow to moderate with low inflation and continued low interest rates. Goldilocks.

When you turn 70and one half you will be required to take a required minimum distribution from TSP that will be set by regulators. You can also take monthly payments - the amount of your choice - and these payments can be sent anywhere to include traditional IRAs. When you pass all funds go the the primary beneficiary that is usually the wife. If children are named as eventual beneficiaries then TSP will send the remaining funds in a lump sum which require higher taxes. Remember you cannot transfer money from a traditional IRA to a Roth IRA if yourmarried income is more than $160,000/year. There is much more- but this should give you some ideas. Ask and you will find the answers.

I justremembered you can give children or anyone up to $15,000/year without enacting any kind of estate type tax. I believe the current estate tax policy may be eliminated entirely in the not to distant future. Currently there is no estate tax on any funds that pass to the spouse. After that the first exemption is 1million, and is set to rise to 3 million by 2008.

Giving money to children has consequences, though. It will count against them dollar-for-dollar in financial aid calculations when they apply for college (i.e. whatever assets the kid has will be expected to be used to pay for college). Money in the name of parents, on the other hand, is only counted at ~35% I believe. Money held by relatives/grandparents is not counted at all. This makes a huge difference in eligibility for state and federal aid.

Birchtree wrote:

At some point you will apply for social security - the longer you can wait the greater the amount provided. Sorry but I have to disagree. Please look at the excel worksheet attached to show that it is more beneficial to start taking money out of SS at age 62.

If your wife has her own retirement plan - that may be more family money you cannot control- it all adds up to either help you or hurt you depending upon you future plans. Sorry but I have to disagree about this scenario hurting them rather than helping them. Having more retirement plan is always better than having less, even if you have to pay taxes on them...

When you turn 70and one half you will be required to take a required minimum distribution from TSP that will be set by regulators. You can also take monthly payments - the amount of your choice - and these payments can be sent anywhere to include traditional IRAs. Sorry but I have to again disagree. Once you reach 70 1/2 years, you reach your RMD. This means that Uncle Sam gotta get paid. You have no more recourse. You have to at least take out an Minimum Required Distribution (MRD). You can't send any of your TSP to an IRA. It is the end of the road for you once you reach 70 1/2...

When you pass all funds go the the primary beneficiary that is usually the wife. If children are named as eventual beneficiaries then TSP will send the remaining funds in a lump sum which require higher taxes. This is the reason I advocate transferring TSP to traditional IRA then later ROTH IRA.When to do it is anyone's option but it should be done nonetheless. Not doing it will cut off the possibility of passing your hard earned money to yourchildren and to their children etc.by having your fund continue to earn tax deffered withcompounding interest. Only IRA can do this. TSP, 401K, 403b can't.

Remember you cannot transfer money from a traditional IRA to a Roth IRA if yourmarried income is more than $160,000/year. There is much more- but this should give you some ideas. Ask and you will find the answers.$160,000.00 is AGI per year not actual. This means that you can be earning $200,000.00 and still have an AGI of $100,000.00. You can easily beat this if you have real estate through phanton income such as depreciation and deductible expenses.

I justremembered you can give children or anyone up to $15,000/year without enacting any kind of estate type tax. This is per person so a couple can actually give out $30,000.00 (I thought limit is $10k but it might have been increased). And it is not limited to your children.

I believe the current estate tax policy may be eliminated entirely in the not to distant future. Currently there is no estate tax on any funds that pass to the spouse. After that the first exemption is 1million, and is set to rise to 3 million by 2008.If you want to planto maximize going around estate tax, please plan to dieon 2010.This is theyear the cap for estate tax is eliminated. However, it goes back again on 2011. Weird huh?

Pyriel,

I'll have to double check on the required minimum distribution - but I think if you already have a monthly payment plan in place it remains in place - you may be required to increase the amount to comply with RMD. If you have a monthly payment plan set up you can have funds sent to an IRA - the longer it is drawn out the better. That way you keep TSP money working - some people will actually prefer to take the annuity program. Now the problem you are going to have is how to control all that rent income - you can only depreciate so much. Even when we all convert to a Roth IRA we are still going to have certain complexities to deal with - like RMD for the heirs. We'll get to the bottom of the subject eventually.

Now some employers will start offering a Roth 401k program - if the Gov ever offers a process to go from a defined benefit program to a defined contribution program this would be nirvana for me. My wife made the conversion as a State of Florida employee - a whole new set of retirement parameters- especially choosing a beneficiary. And she is in complete control of her funds - the money belongs to her. We can discuss this option at a later date. And by the way - waiting longer gives you a larger payout on social security.