Thanks, Shannon and Bill.
Here's our next question from Mitch
I need to pre-qualify that I am not up-to-speed on a TSP inheritance versus the IRA inheritance.
In general, the IRA will allow your wife to assume it as her own, or inherit the IRA.
I would suggest finding a NAPFA advisor in your area to work with and help you answer this question by looking at you full financial status. Check out the "Find an Advisor" link on the NAPFA website, www.napfa.org.
Mitch, I'm not familiar with the TSP distribution options at death, however in doing a quick search it looks as though a non-spouse beneficiary (children) are not able to retain a TSP account. However, they are able to direct the payment to an "inherited IRA" that would be with a different custodian. If this is what you are looking for with regard to moving the money to an IRA first then I believe keeping the money in the TSP plan will provide that end result. One thing to note is that the investements within the TSP have the lowest expenses out there. I found this information in a brochure on the twp website: "Death Benefits: Information for Participants and Beneficiaries".
Thanks, Shannon. That should be helpful
Thanks, all. Great advice
Here's our next few questions from Sammy S
Sammy, if your mom deposited the money into the account, since she is a joint owner it wouldn't be considered a gift. If she wrote you a check it would be considered a gift and no gift tax return would be filed since it is under the $13,000 threshold for 2012. My suggestion would be to move the money to a new account that is joint with your wife instead of re-titling the account.
And next up, we have a couple questions from Dave L.
David, I would pay the college bills first from the 529 plan, then from the UGMA account. If there is money left over when your child is finished with school there wouldn't be any penalties for taking it out of the UGMA account and spending it on non-college expenses. One note however, is that when you sell investments in the UGMA account, your child will have to pay capital gains taxes on the gains.
And here's another one from David
David, if you are an employee of the company with no retirement plan then your options are to save in a Traditional IRA or Roth IRA. You can always save more into a taxable account and invest the money in a tax-efficient way. When you sell investments in the accout you will be subject to capital gains which currently are lower than the ordinary income tax rates paid when withdrawing money from a Traditional IRA. If you are considered an independent contractor, then you can set up your own retirement account, such as a SEP-IRA, SIMPLE-IRA, or a solo-401k plan.
I assume that you are a normal (w-2) employee for this company and not a sub-contractor. If you are married, then you might consider the spousal IRA contribution.
Thanks, all! Here's another one for you from e2sean
e2sean - If you take a lump sum distribution from the plan, then you have 60 days to roll it over into an IRA without it being considered a taxable event. It would be better to work with your employer to transfer the money from the cash balance plan to a Rollover IRA without you receiving a distribution. Talk with your benefits department to see what paperwork is needed to do a trustee-to-trustee transfer.
Here is one more question for you from Robert
Robert - talk with the institution where the CD is held to see if they will allow RMD distributions to occur from the CD without any penalties. Normally, if you cash in a CD early there are penalties. If there would be a penalty, I would do as you said and put the money into a money market account instead of a new CD. One other option would be to put all but the required distribution for 2014 into a 1-year CD so there would be no penalties and you could still invest in the CD.
Alright, well thank you to everyone who participated today and asked such wonderful questions!
Shannon, Bill and all of the advisors who helped out today, I cannot thank you enough for your service!!
You are all welcome. It was enjoyable and there were some great questions.