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Tax Planning in a Time of Change

With the holidays out of the way, it’s time to look out for those W-2 and 1099 forms and think about filing your annual tax return.

The transition to retirement has significant tax implications, so tax planning is a big part of retirement planning. In addition, there has been a recent major change to the tax code, which only adds further challenges to tax planning.

Since I’m not an accountant, I thought I would call on my associate, Bob Leins, who is a CPA, for help. Here are some tips from Bob and a few things to know about taxes and your federal retirement:

  • An individual retirement arrangement contribution for 2017 can be made as late as April 17, 2018. This provision applies to both traditional and Roth IRAs. Use IRS Form 8606.
  • If you file a joint tax return, you can contribute up to $5,500 to a spousal IRA for a spouse who doesn’t work outside the home ($6,500 if the non-working spouse is age 50 or older at the end of 2017).
  • If your earned income is below a certain amount, you may be able to claim the earned income tax credit. A...

The Index: 2018 Edition

Every year at this time, I update my annual index of links to previous columns on important topics in the federal retirement process. I’ve added new columns from 2017 to the top of the list in each subject area below. I’ve also deleted links to some older columns that are a little out of date.

The result is what I hope is  a comprehensive retirement planning resource guide.  If there is a topic you think you need to explore, these columns may provide you with a starting point to learn more about the steps you can take to making the key decisions that will help you enjoy a financially secure and mentally rewarding life after retirement.

Topics

1. Retirement Processing

2. Post-Retirement and Phased Retirement

3. New Employees and Midcareer Employees

4. Best Dates to Retire

5. Deciding to Retire

6. Congressional Proposals and Action

7. Things to Do to Get Ready

8. Sick Leave/Annual Leave

9. Service Credit Issues: Civilian

10. Service Credit Issues: Military

11. Survivor Benefits

12. Law Enforcement and Special Groups

13. Eligibility and Computation of CSRS and FERS

14. Other CSRS and FERS Issues

15. CSRS vs. FERS

16. CSRS Offset

17...

The Most Common Question About Federal Retirement

For the first column of the new year I thought I would go back through my emails and find the most common question from 2017. Since many of the employees and retirees who send me emails are either retiring soon or have already retired, it is not surprising that the winner is…

Should I sign up for Medicare Part B?

There were, of course, many variations on that general question, depending on the circumstances of the individual emailer. But there are some general principles that apply to all of those facing this decision.

First, here are some basic facts: Medicare Part A pays for inpatient hospital stays, care at skilled nursing facilities and some home health care. Part B, which is expensive, is insurance that helps pay for doctors' services and outpatient care. It also covers other medical services, such as physical and occupational therapy, and some home health care.

Your Federal Employees Health Benefits Program plan will cover you after you turn 65 even if you do not enroll in Medicare. But your FEHBP plan would like for you to sign up for Medicare, since Medicare would then be the primary payer of your health expenses. Many FEHBP plans...

Developing a TSP Withdrawal Plan

We’re in the midst of the end-of-year retirement season for federal workers who are ready to make the big transition from employee to annuitant.

In January 2017, the Office of Personnel Management received more than 15,000 new retirement claims for employees who filed at the end of 2016. The numbers for end-of-2017 retirements won’t be available until February 2018, but they’re likely to be high, too.

In addition to filing claims for retirement benefits under the Civil Service Retirement System or Federal Employees Retirement System, many retiring employees also file withdrawal elections for payments from their Thrift Savings Plan accounts.

Most employees file for CSRS and FERS retirement benefits long before their planned retirement date. The TSP, on the other hand, can’t process a post-separation withdrawal form until they have been notified by your agency’s payroll office that you no longer work there. The earliest a new retiree should submit a request for a TSP withdrawal is about 30 days after their retirement date. For example, if you are retiring on Dec. 31, 2017, then you may want to wait until after Jan. 31, 2018, to submit your application for a partial or full...

5 Things to Remember Before You Tap Into Your TSP

So you’ve accumulated a handsome sum in your Thrift Savings Plan account and are close to being eligible to retire under the Federal Employees Retirement System. Congratulations! Have you considered how you will draw down the balance of your retirement savings? Because you will soon have more options, due to the enactment of the TSP Modernization Act.

The TSP published a fact sheet this week outlining some of the frequently asked questions about the new law. TSP officials are clearly aware of the excitement among participants about greater flexibility in drawing on their savings, but they’re also asking for some patience while they revamp their systems to roll out the new options.

In the meantime, let’s revisit some general principles about tapping into your TSP after retirement. Here are a few things to think about before making a post-separation withdrawal election:

You may want to delay your request if you don’t need the money. If you plan to go back to work after you retire, you probably won’t need to begin using your retirement savings. Many employees who retire under FERS (as well as the Civil Service Retirement System) may not be financially ready to...