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I have a question maybe someone can help me with. My husband and I will be moving into a new house in about 3/4 months. We may need some extra cash to make everything come together more smoothly and it would be easy to pull it out of his TSP (he is 60 and retired)....but if we pull it out is it possible to put it back into a different retirement fund by the end of the year when we have more cash back in hand? For example - pull 50k out of the TSP....and put 50K back into another retirement fund (so as to avoid taxes) in the fall (since I don't think we can put it back into the TSP)?
I first wouldn't make such a impostnat decision besed o internet opinion without further reserch .Second I know that many eaccounts in tax accontsdo not allow retired people to contribute and all I know of limit yearly contribution even when working.
There may be the possibility to pull the funds out and then deposit them into a rollover IRA. Things to be aware of since it won't be a direct rollover. First, taxes will likely be withheld from the withdrawal (20%). When you fund the IRA, you'll need to include the withheld portion in order to avoid taxes. I believe there is a time limit too (60 days), between withdrawal and funding. Check out IRS publication 575 and 590.
The only way to avoid taxes is to see if you can do a direct rollover out of the TSP into an IRA. Then withdraw from the IRA and redeposit within 60 days - which IRS allows. This strategy, however, does not fit your timeframe. You need the money in June and want to put it back in Nov/Dec. Too late for the 60 days.
So, because you have to redeposit the withdrawn funds, the other strategy would be the 60-day withdrawal/redeposit, using credit card 0% balance transfer checks to pay back the IRA. Had to do exactly that two years ago when I did a real estate refinance. Withdrew from IRAs to cover a buydown on the new mortgage. When deal was closed, used 0% balance transfer checks, paid back most of the IRA to avoid taxes, which I reinvested in a few mutual funds and made 10x what it cost me in balance transfer fees (1%). Had I not done that, I would have been KILLED (for me) on income taxes - maybe $10,000 - and lost the earnings. Following year, I withdrew from IRA only enough not to have a tax consequence, repaid part of the CC balances, did another 0% balance transfer to cover what remained on the CCs. My goal is not to take a huge lump sum from my retirement account in any one year. It's far more cost-effective to use my CCs - borrow @ 1%, earn 5-10% - and avoid taxes. Even if I earned nothing, the tax savings is worth it.
Last edited by Ariadne22; 02-14-2013 at 11:09 PM..
there are irs rules that make rolling over 401k money into an ira if you are still employed by the company very tricky and you may not be able to do it..
you can only rollover gains, previous 401k rollovers and employer contributions ,not your own contributions if under 59-1/2 and that is assuming your plan even allows it.
if you are 60 years of age or older, and still working, most qualified plans allow “age 59 1/2 rollovers”. If a particular plan does not, they most likely allow rollovers at age 65. there is such a thing as the “in-service withdrawal” too. that means you can rollover or otherwise withdraw employer contributions, or employee rollover contributions but not your own contributions..
Last edited by mathjak107; 02-15-2013 at 02:50 AM..
Thanks all! Definitely something to think about. I think we'll just wait until the last minute and do it only if we absolutely have to which is what we were going to do anyways. It makes it all a little tricky...but we'll deal with it. This is for our final retirement home and the expenses between moving and selling our other home. Once we sell our home we live in now - we will have no problem, but we want to put some money into to repaint, replace carpet, etc.. Houses in our neigbhorhood sell within a week once they go on the market since there are so few...it's just getting to that point that is the issue. We'll just keep plugging away Thanks again for all the responses. I'm just going to assume that at this point - if we make any withdrawal, we will just have to pay full taxes.
The only way to avoid taxes is to see if you can do a direct rollover out of the TSP into an IRA. Then withdraw from the IRA and redeposit within 60 days - which IRS allows. This strategy, however, does not fit your timeframe. You need the money in June and want to put it back in Nov/Dec. Too late for the 60 days.
So, because you have to redeposit the withdrawn funds, the other strategy would be the 60-day withdrawal/redeposit, using credit card 0% balance transfer checks to pay back the IRA. Had to do exactly that two years ago when I did a real estate refinance. Withdrew from IRAs to cover a buydown on the new mortgage. When deal was closed, used 0% balance transfer checks, paid back most of the IRA to avoid taxes, which I reinvested in a few mutual funds and made 10x what it cost me in balance transfer fees (1%). Had I not done that, I would have been KILLED (for me) on income taxes - maybe $10,000 - and lost the earnings. Following year, I withdrew from IRA only enough not to have a tax consequence, repaid part of the CC balances, did another 0% balance transfer to cover what remained on the CCs. My goal is not to take a huge lump sum from my retirement account in any one year. It's far more cost-effective to use my CCs - borrow @ 1%, earn 5-10% - and avoid taxes. Even if I earned nothing, the tax savings is worth it.
I'm planning on some vision medical work that won't be covered by insurance and was planning on using my IRA to cover the cost. The use of 0% CC is a great idea! I was trying to figure a way to best manage income and the CC idea will let me spread IRA withdrawals out over 2 or even 3 years. It will likely save me 10% in taxes on some of the withdrawals. Thanks!
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Thanks again for all the responses. I'm just going to assume that at this point - if we make any withdrawal, we will just have to pay full taxes.
