FERs Retirees, anyone?

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uscfanhawaii said:
NO!!!
That is YOUR $$.

And I would like to add one more advantage to rolling over to an IRA: Tax Diversification.

You can have 2 separate Traditional and Roth accounts. You can take out from the Traditional, but before you get to a higher tax bracket, you can switch to taking out from the Roth to avoid higher taxes.

TSP will automatically take equal amounts from both Traditional and Roth.
Click to expand...

Note:just to clarify USC's comment- if you have both traditional tsp and roth tsp, you can only rollover if you have an existing roth ira since distributions will be taken from both. So be sure to have opened a roth IRA before doing a roll over
 
Advantages of a TSP roll over to an IRA (at 59 1/2):
1. IRA- you can change your withdrawal schedule/amount anytime. TSP has a limit - once a year and must be done at a certain time frame. (I think, October or November)
2. Real time trading unlike TSP- by 12 noon.
3. Unlimited Trading- unlike TSP, only 2x a month plus IFTs to G.
4. More diversification of your investments unlike TSP with only G F S C I and Target funds(Life)
5. With IRA, you can withdraw any amount of money anytime. TSP allows you only 1 "big" withdrawal.
6. Tax diversification

Despite all these rollover advantages, Don't forget the downside...higher expense ratio...
Updated #6
Anything else?


p.s. I noted 59 1/2 because if you retire early, you can start withdrawing with TSP asap, but not IRA.
 
Last edited:
4 Ways Early Claimers Can Boost Social Security Benefits

Excerpt from the link above...if you don't have 35 years SS earnings...

Replace a Zero

Your Social Security benefit is based on the highest 35 years of earnings in your work history -- including any years of earnings you rack up while taking benefits. The Social Security Administration annually reviews the earnings records ofbeneficiaries who are still working. So if you take your benefit early but continue to work, your benefit will continue to climb if your annual earnings top the earnings of another year.
If you have, say, only 30 years of earnings and five years in which you had no earnings, a year with any amount of annual earnings would replace one of those zero years -- and that would increase your lifetime monthly benefit amount. For example, a woman who left the workforce for a few years to care for young children could boost her benefit with even a part-time job if those earnings replaced a zero year.
 
Say you retire on 12-31-15 and get $25,000 for your accumulated leave in 2016. Does that $25,000 count as social security earnings for 2016 - and thereby give you another year to replace a zero or low wages from 35 years ago? It should since you're paying SS taxes on that $25K.
 
Skorcher said:
Say you retire on 12-31-15 and get $25,000 for your accumulated leave in 2016. Does that $25,000 count as social security earnings for 2016 - and thereby give you another year to replace a zero or low wages from 35 years ago? It should since you're paying SS taxes on that $25K.
Click to expand...

You got a point there, but let's hear what others will say...
 
It was hard to find the answer on the internet, but SSA says vacation pay is wages for computing the SS benefit.

SSA Handbook § 1327
1327. Does vacation pay count as wages? Vacation pay and pay you receive instead of taking a vacation count as wages. It does not matter whether you are paid for a period that you did not work. It also does not matter if the payment is for additional compensation for vacation time you did not use.
 
Skorcher said:
It was hard to find the answer on the internet, but SSA says vacation pay is wages for computing the SS benefit.

SSA Handbook § 1327
1327. Does vacation pay count as wages? Vacation pay and pay you receive instead of taking a vacation count as wages. It does not matter whether you are paid for a period that you did not work. It also does not matter if the payment is for additional compensation for vacation time you did not use.
Click to expand...

Below is a hypothetical inquiry I sent to OPM last year, although it pertains more to its treatment for supplemental income purposes - per OPM- It is not earned income.

Re: Accrued/Earned Annual Leave [#848745]
Thank you for your email inquiry.

Your annual leave refund will not affect the supplemental annuity and the payment will not considered earned income. The supplemental is based on full year calendar salary deductions not annual leave.

If we can be of further assistance, please contact our office.

Sincerely,

N McBride
Legal Admin Specialist
Customer Services Group
1 (888) 767-6738


--Original Message--
From: @yahoo.com
Date: 6/3/2014 12:28:10 PM
To: TestEgain@opm.gov
Subject: Accrued/Earned Annual Leave

I plan to retire the end of 2014. I am 58 with 30 years of FERS service credits. If I cash in my accrued or earned annual leave at the end of the year ($23,000) will my supplement be reduced? Is lump sum payment of annual leave considered earned income?

Thank you!
MCar

Sent from my iPad
 
Skorcher said:
Say you retire on 12-31-15 and get $25,000 for your accumulated leave in 2016. Does that $25,000 count as social security earnings for 2016 - and thereby give you another year to replace a zero or low wages from 35 years ago? It should since you're paying SS taxes on that $25K.
Click to expand...

I had that exact circumstance and my SS benefit was adjusted upward a year or so later. I also got a letter asking for a large repayment of my benefits since I received a w-2 with wages in the year I received the AL lumpsum. It actually does not count as wages for the earned income cap but it took several calls and letters to get it straightened out. I never had to repay any of my SS benefits as I got it fixed before the deadline passed.
 
Scout333 said:
I had that exact circumstance and my SS benefit was adjusted upward a year or so later. I also got a letter asking for a large repayment of my benefits since I received a w-2 with wages in the year I received the AL lumpsum. It actually does not count as wages for the earned income cap but it took several calls and letters to get it straightened out. I never had to repay any of my SS benefits as I got it fixed before the deadline passed.
Click to expand...

That is what made it so hard to figure out. SSA has two different definitions of wages or earned income. One is for computing the 35 year history of earned income and the other is for computing the earned income cap after you are receiving the supplement. It appears that vacation pay counts in the 35 year history computation, but it does not count against the cap the first year you receive the supplement.
 
Skorcher said:
That is what made it so hard to figure out. SSA has two different definitions of wages or earned income. One is for computing the 35 year history of earned income and the other is for computing the earned income cap after you are receiving the supplement. It appears that vacation pay counts in the 35 year history computation, but it does not count against the cap the first year you receive the supplement.
Click to expand...

If that's correct, then I will have 31 SS years if I retire at the end of 2015 since my AL will be for 2016. That's good since I will only have 4 SS years to catch up and I could do it in 2017-2020 before my 62nd bday.
 
nnuut said:
Earned income IS taxable!
Click to expand...

Yes Nnuut. I guess the discussion was whether the proceeds from cashing annual leave will affect supplemental income(under 62) and also if social security taxes will be taken out since according to OPM, annual leave payout is not considered earned income.
 
Maricar19 said:
Yes Nnuut. I guess the discussion was whether the proceeds from cashing annual leave will affect supplemental income(under 62) and also if social security taxes will be taken out since according to OPM, annual leave payout is not considered earned income.
Click to expand...

For the social security tax piece SS Taxes were taken out on the AL lump sum payout and benefits were adjusted after the next year W-2 was issued. i.e. if you retire 12-31-2013 and receive your lump sum AL payout 1-31-2014 when you receive your 2014 W-2 which includes the AL lump sum payout in 1-31-2015 or so. I received an adjustment to my SS benefit approx. 4-2015 or so. Shortly thereafter I received a letter asking for a large repayment of my benefits since I received a w-2 with wages in the year I received the AL lumpsum. It actually does not count as wages for the earned income cap but it took several calls and letters to get it straightened out. I never had to repay any of my SS benefits as I got it fixed before the deadline passed. Hope this helps!
 
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