The ROTH IRA Switch! TSP Thoughts, & The 2008 Election
by Dennis V. Damp, Retired FAA

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• The Roth IRA Switch!
• TSP Thoughts - Annual Statement & Gains
• Commentary - The 2008 Election

Retirees may discover that shifting some or all of their THRIFT savings or traditional IRAs into a ROTH will save them taxes on investment earnings and growth long term. A good idea in many cases. Roth IRAs provide tax-free earnings on your contributions however you MUST pay taxes on your initial ROTH contributions. The amount that you transfer into a ROTH is fully taxed at current tax rates. Since you already paid taxes on your contributions you can withdraw them from a Roth IRA at any time tax-free. Generally, if your account has been open for at least 5 years, your earnings are tax-free when you withdraw them. Usually, you must be 59½ or older in order to avoid paying a 10% early withdrawal penalty tax on your earnings. Other exceptions to the withdrawal penalty tax may also apply. IRS publication 590 provides detailed guidance.

Roth IRAs do not require minimum distributions for participants starting at age 70½ like traditional IRAs require and beneficiaries pay NO INCOME TAXES for inherited accounts open at least five years. ROTH IRAs are one of the few investment vehicles that we have, other than municipal bonds, that earn tax free income.

The 2008 income limits are $116,000 for an individual and $169,000 for a married couple filing jointly. These income limits are eliminated in the year 2010. At that time anyone, regardless of income, can convert their THRIFT and IRAs to a ROTH. Thanks to the 2006 Pension Protection Act, if you convert to a ROTH in 2010 you are permitted to pay the taxes over a two year period, half in 2011 and the remaining half in 2012, a great deal for all. Uncle Sam receives a windfall in 401K taxes that they wouldn’t normally receive for decades and those who convert will earn tax free gains on their investments and get to defer the tax burden over a three year period, 2010 through 2012.

Retirees that are working and earning income under the limits, most federal retirees, can open and contribute to a ROTH. Contributions limits for 2008 are the lessor of $5,000 or your taxable compensation for the year. If you are over 50 the limit increases to $6,000.

ROTH Conversion Questions & Answers - http://federaljobs.net/retire/benefits.htm You will also find links to informative articles on this subject following the Q&As.

TSP Web Site - http://tsp.gov http://tsp.gov/faq/faq15.html

IRS Publication 590 - http://www.irs.gov/pub/irs-pdf/p590.pdf

TSP Thoughts - Annual Statement & Gains

I received my annual TSP statement several months ago. Since I retired three years ago and stopped contributing my TSP account has increased by just under 20%. Even with the down market I’m holding my own. The funds gains for the past 12 months are revealing:

It would be tempting to switch to 100% G Fund at times like these, however you would more than likely loose out when the market recovers. If you go back to 1997, 98 and 99 the C fund advanced a total of 82% during that three year period, hard to believe when you are in a down market. The flip side of the coin is that had you invested just in the G Fund for the past 10 years the total gain would have been 5.12% opposed to the just 5.88% total C Fund return and you may have slept a lot better during the down times. If we could only time the market we would all be millionaires.

One significant factor is revealed in the table for the Life Cycle funds. As you get closer to retirement the life cycle fund are doing what they were designed to do and they become more conservative. The chart shows that when you reach your target, even in a down market you still earn a decent return and at the out years, the L 2040 fund didn’t do that bad at all. All in all my TSP return on my total contributions over the years, is now at 220%. I’ve always been fairly conservative with my TSP account.

Commentary - The 2008 Election

The election is almost upon us and I’m sure this will be a gut wrenching contest as is now measures up. My concerns revolve around the direction the country needs to take to continue our path of prosperity and growth. There are many critical issues to consider that both parties are side stepping to avoid stepping on anyone’s toes. This is unfortunate for all of us. We need to regain energy self sufficiency and encourage oil exploration until we can develop viable energy options. We must stop the flood of illegal immigrants that come to this country expecting full social services and health care when our working middle class and poor can’t afford the same. Illegal immigrants are bankrupting border states. The money we spend on the border, etc could go to infrastructure and other needs. We don’t have to build a fence to keep illegal immigrants out. All we have to do is pass laws denying them free medical care, food stamps and social services, stop granting automatic citizenship to their newborns, fine employers who ignore our laws and employ them and the problem will resolve itself, without huge costs.

When it comes to energy self sufficiency, Congress has repeatedly rejected drilling in Anwar and off shore. Had they approved this 20 years ago when it was first proposed we wouldn’t be paying $4.00 a gallon for gas and looking at $5 to $7 a gallon in the near future. Sure we must fund research for renewable energy options but we can’t place all of our bets on a maybe. We have the oil reserves NOW but Congress fails to act. It is almost as if they, our representatives, want American’s to suffer and loose our international competitive edge.

This election is too important to stand on the sidelines. I encourage everyone to get involved, write your Congressman, and vote your conscience.

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May 1, 2008

Military Deposits, Retire EZ,
Travel, & TSP Changes

by Dennis V. Damp, Retired FAA

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• Military Deposit Issue
• Retire Easy - OPM Update
• Retirement Travel - A Great Way to See America
• TSP Changes - Easy Does It!

Don’t loose track of your military time buyback. John wrote that he is in FERs and his base is offering an early out. He paid back his military time through monthly payments in the mid 1980s. However, he worked at several military installations that have since closed and his current HR office has not been able to locate his military payback documentation. He also contacted payroll and they were not able to help. 　

I told John that I kept a copy of the SF 2803 Application to Make Deposit or Redeposit that I submitted in 1987 to pay back my military time. I had to attach a copy of my DD Form 214 and send it to the Air Force Accounting Office. The Air Force replied with my total pay and HR determined what I had to pay back. I paid back the total owed over several years. I advised John to locate a copy of his pay stub from the agency that he was working with at the time he paid it off. My FAA pay stubs show the total military payment and a balance due of zero. Fax a copy of your old pay stub to your HR retirement specialist and have your Official Personnel File (OPF) updated. I kept a copy of the last pay period pay stub with each years federal income tax. You may have a copy with your tax records that shows the deposit.

I also suggested that he ask his personnel office to contact other agencies that he previously worked with to obtain this information. I would also request a search of his Official Personnel File to locate this information. I understand that many agencies have automated their OPF files so you may be able to access your OPF online.

If you paid back your military time make sure your total military payment and balance due is annotated on your current pay stub. Without this documentation your federal annuity will be reduced at age 62, if you are eligible for Social Security. If you are eligible, your annuity will be recomputed to eliminate all credit for post-1956 military service. Visit http://federaljobs.net/retire/militarybuyback.htm for complete details.

Retire Easy - OPM Automates Retirement (Test Program)

On February 25, 2008, OPM began the rollout of RetireEZ. Approximately 26,000 employees in agencies serviced by the General Services Administration’s (GSA) payroll processing center are now covered under the new system. The initial test agencies include OPM, GSA, the National Archives and Records Administration, and the Railroad Retirement Board. Subsequent rollouts will cover the remainder of the Executive Branch, the U.S. Postal Service and the Legislative and Judicial Branches.

OPM is paying full retirement benefits at the payment commencement date. No longer are retirees under the new system receiving interim payments and waiting for months until their actual payment amounts are calculated. OPM converted millions of paper records to automated data that underlies the modernization. New retirees under the RetireEZ program are receiving better service. Tammy Flanagan describes the pros and cons of the RetireEZ system in her April 11^th column that is linked below.

Additional Articles and Guidance for Retire EZ:

Tammy Flanagan’s Government Executive Article
OPM Official RetireEZ Introduction

You’ve worked hard to prepare for retirement. Your financial life is in order. So now what are you going to DO in your retirement? For many boomers, it is all about travel, volunteering, the grandkids and "the good life." Travel can be rewarding if you prepare and plan your trips. It seems easy enough; select a destination, book a flight and bon voyage! It isn’t quite that easy and I speak from experience, traveling all over the US and in Germany.

Phil and Carol White have developed a keynote talk especially for retiring Federal employees who are contemplating extended travel as one option. This fast-paced seminar is perfect for your lunch break, retirement seminars or morning kick-off meeting offering lots of practical tips, humor and advice. The Whites discuss everything you’ll need to know – from budgeting, to what to do with your house, to leaving your friends/family, – and much more.

The Whites are frequent guest speakers, having spoken at conventions such as the National AARP Life @ 50+, The Great North American RV Rally, AAA-Oregon and many more in conjunction with their award-winning, best-selling book, Live Your Road Trip Dream, RLI Press 2008 www.roadtripdream.com.

If your agency is scheduling a retirement seminar they might want to invite Carol and Phil White to their event, especially if you are on the West Coast or at least visit their web site. They are the authors of Live Your Road Trip Dream; Travel for a year for the cost of staying home. Nancy Holston is going on a road trip, for the first time, in a motor home this fall and she is going to review this title for our Book Review section.

For more information on how to book them for your next seminar, email Carol at carol@roadtripdream.com or call them at 888 522-8747.

TSP Changes - Easy Does It

TSP fund participants are now limited to two interfund transfers per month. Last year it became clear that a few thousand of the 3.9 million Thrift Savings Plan (TSP) participants were making frequent interfund transfer (IFT) requests. Because this activity was clearly accelerating, and in light of the detrimental effect on fund performance and transaction costs, the Agency implemented limits on interfund transfers.

The Agency published a final regulation that takes effect Thursday, May 1, 2008. The regulation will limit the number of unrestricted interfund transfer requests to two per month. After a participant has made two interfund transfers in a calendar month, the participant may make additional interfund transfers only into the G Fund until the next calendar month. For more information about this change, see the Questions and Answers on this topic.

Most if not all private sector fund families have trading limits because of the additional costs incurred with frequent trading. For example, at Vanguard Funds you can’t trade back into a fund you just sold in a retirement account for 60 days except for money market funds. Other restrictions include an early redemption fee of 1% or more on many mutual funds if you don’t hold the fund for at least 30 days. At Fidelity they have similar restrictions including early redemption fees on many funds that are sold within a 30 day period of up to 1% or more plus they limit you to what they call 4 round trips a year and issue a warning after two. For example, if you go in and out of a fund 2 times in a 90 day period you are locked out of any additional trading for a 85 day period.

If you want to day trade you would have to open a brokerage account and pay for each trade. The TSP is protecting all fund participants by limiting costs which increases our gains. Like they say, "there is no such thing as a FREE lunch."

Rebate Checks, Survivor Update, New Job Listing,
Helpful Article Archive, and Gas Commentary

by Dennis V. Damp, Retired FAA

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FEATURING:

• Are Your Eligible For the Stimulus Rebate?

• Survivor Annuity Spreadsheet Update Coming

• Retirement Jobs Board - New Listing

• Helpful Article Archive - Tammy Flanagan

• Commentary - What’s UP with Gas!!!!!!!

Federal employees and retirees who paid income taxes on either wages, pensions, annuities, Social Security benefits, IRAs, and other investments and retirement income are eligible for rebates of $600 per person or $1,200 per couple as long as they file an income tax return and don’t exceed the income limits. Taxpayers with children will receive an additional $300 per child. Rebates start to phase out at $75,000, ending at $87,000 adjusted gross income for single filers and $150,000 ending at $186,000 for joint filers.

Workers and retirees earning wages, Social Security taxes or disabled veterans benefits, that paid little to no income taxes, qualify for payments of $300 for individuals or $600 for couples filing joint returns. You must file a 2007 federal income tax return by April 15, 2008 and write "Stimulus Payment" on the top of the tax form to receive a check. Checks should arrive in May and you don’t have to pay income taxes on your rebate.

Survivor Annuity Growth Chart Update Coming

I received a number of positive comments from site visitors and readers concerning the FREE Projected Retirement Annuity Chart that Frank Cullen designed and contributed to the retirement forum. The chart shows retirees what their actual full survivor’s benefits will be for their spouse and projects the growth of their annuity based on historical COLA averages though the year 2051. Frank is working on an update that will allow users to change the survivor benefits calculation to anything up to the full 55% percent. If you elect less than full survivor benefits the new form will calculate the actual annuity and project the annuity growth through 2051.

Download the current FREE Projected Retirement Annuity Chart and use it for your Survivor’s Binder and discuss the results with your significant other. When Frank completes his update I will let everyone know through our email newsletter and post it online at http://federaljobs.net/retire.

CGH Corporation is looking for retired FAA Maintenance Technicians and Engineers who would like to work on installation/maintenance projects. Projects would be based on the success of bids by CGH Corporation in conjunction with other contractors. Projects could involve installation activities, maintenance projects, maintenance/installation of Airport security equipment, project management functions, modernization projects and engineering projects. Checkout the full listing with contact information online at http://federaljobs.net/retire/jobsboard.htm.

Tammy Flanagan is the senior benefits director for http://www.nitpinc.com/The National Institute of Transition Planning, Inc.(NITP) which conducts federal retirement planning workshops and seminars. She has spent over 25 years helping federal employees take charge of their retirement by understanding their benefits. Retirement planning is critical and we all need professional experts like Tammy to provide the advise we all need to make the right decisions. Ms. Flanagan writes a retirement planning column for Government Executive Magazine and a list of her retirement planning articles is available at http://www.nitpinc.com/gov_ex_archives.html.

The goal of http://federaljobs.net is to be the ultimate one-stop informational resource for federal employees exploring retirement options and for retired feds needing benefits and general support information. Our intent is to provide the answers you need and to add other professional voices to the mix so you have a complete picture. Tammy is a consummate professional federal benefits consular and I highly recommend reader her insightful articles. http://federaljobs.net/retie

I frequently hear people say "why not alternative energy resources." I say "why not drill for oil NOW and use our vast coal reserves until you have viable alternative energy options available." Congress MUST implement an energy policy that addresses our short and long term energy needs and returns the U.S. to energy self sufficiency. Sure, we should be developing alternatives; fuel cell technology, solar power, etc. However, if you need water NOW you connect to a water system or dig a well. Do you look for water alternatives! Should we all be drinking and bathing in milk, another renewable resource, driving the price of milk to where you can’t afford to drink it? In a drought we conserve, cut back on water usage, and look for other sources if available. Water is used in most everything we do and so is OIL.

The powers to be hold our vast oil reserves hostage insisting on impractical renewable energy resources instead of drilling in ANWAR, off shore, and using our extensive coal reserves. This poorly thought out policy makes us dependent on Mid East oil, subjecting our country to terrorist attacks funded by the oil we purchase. Congress has also restricted oil refinery expansion for more than two decades so now when a refinery goes offline, for maintenance or repair, gas prices escalate regardless of our dwindling supply. What a mess.

Walter Williams, a professor of economics at George Mason University, exposed the myth of ethanol in an article that was published in the Tribune-Review in March. Did you know that ethanol is 20 to 30 percent less efficient than gasoline, must be shipped by truck because the water content corrodes pipes and unmodified car engines, requires a gallon of fossil fuel to produce one gallon of ethanol, and it takes 450 pounds of corn to produce enough ethanol to fill up the tank of a standard SUV! Where is the conservation, there is no quid-pro-quo here. It also takes 1,700 gallons of water to make a gallon of ethanol. Ethanol is not a viable option, it’s a hoax sponsored by those who wish to profit from escalating corn prices and instil fear so we overlook the reality of the situation.

The bottom line is that we must utilize our extensive oil and coal reserves for our short term needs and fund alternative energy research to address our long term needs. This isn’t a political issue, it’s our country’s issue regardless of political affiliation. The Department of the Interior reports that, "oil reserves in the far Northern Coastal Plain of ANWR represent the nation's largest single prospect for future oil production - greater than any state, including Texas and Louisiana." If we don’t act NOW and tell our representatives what we expect them to do, we will be as much at fault as they are and all will suffer. Contact your representatives and tell them what you think about this subject. 　

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