How to get TSP money to your kids while alive?

Managing your TSP and alternate investment options after retirement or separation from service.

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mjedlin66
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Re: How to get TSP money to your kids while alive?

Post by mjedlin66 »

ArrieS wrote:
mmmmmbeer wrote:Yeah... really wouldn't be much difference between me doing it in TSP right now though right? Other than my TSP Roth would grow much faster with the Seasonal or Daily driving my ROR.


No, it would be very different. Because if you want to give it to them while you are alive you have to take it out and give it to them. Then it has lost it tax benefit. But if than put it into an IRA now it will grow tax free no matter what.

Plus, it's extra tax sheltered money. You are putting 24K into TSP. If you also fund the IRA you are putting an additional 11K into a tax sheltered account. So your total contribution is now 35K sheltered.


You can't deduct contributions to someone else's IRA. Mmmmbeer will pay income tax on the money that he pays his kids, and then the kids will pay income tax (likely zero) on their Roth IRA.
Last edited by mjedlin66 on Fri Aug 04, 2017 2:56 am, edited 1 time in total.
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upsydaisy2
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Re: How to get TSP money to your kids while alive?

Post by upsydaisy2 »

mjedlin66 wrote:Shouldn't this be working in the other direction? My parents spent a fortune keeping me alive with asthma for 10 years. For part of that my dad's union went on a 3 year strike and he worked part time jobs. Over the course of my life, my dad has had 3 major career changes and my mother has had 2. I am alive and successful because of them. So when it comes to gifting, I am thinking the opposite direction as you.

That doesn't even begin to cover the personal loans they have given me several times throughout life or the thousands of places they have driven me. It doesn't cover the job hunting and resume writing help. It doesn't cover the values they taught me which helped me become both successful and humble.

They are both about 60 years old and finally debt free as of last month (no mortgage). My siblings both will find their own career like I did and like my parents did. So if I am going to subsidize anyone, it will be my folks. I am considering buying them new cars or paying for whatever home renovations they want.


Your parents have raised you quite well. I know they will be well taken care of.

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ArrieS
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Re: How to get TSP money to your kids while alive?

Post by ArrieS »

mjedlin66 wrote:
You can't deduct contributions to someone else's IRA. Mmmmbeer will pay income tax on the money that he pays his kids, and then the kids will pay income tax (likely zero) on their Roth IRA.


Never said you could deduct it. Any money he gives to his kids will be taxed no matter which way he gives it or where he gets it from.
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evilanne
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Re: How to get TSP money to your kids while alive?

Post by evilanne »

mmmmmbeer wrote:Alright so I'm just shotgunning this Anne. I'm 42.5, I will probably retire at 50.

My TSP balance as of today is 260k.

Projected balance @ 1st eligible in 7 years:

9% avg ROR = $721,480.00
10% = $761,572.49
11% = $803,736.69
12% = $848,063.86
14% = $943,589.80

Even if I started right now putting everything going forward into a Roth TSP that's what... 24k x 7 years = 168k and then I start withdrawing from all of it combined. I don't know how much it will grow enough in comparison of the 260k I currently have in traditional.

Plus my tax rate right now is higher than it will be then for sure. Between the wife and I we're @ around 200k. I don't think between her salary, and my pension/tsp we'll be at that later, so taxes now will be more expensive then later.
At 10% rate of return, $168K would be about $250K in Roth at retirement plus government matching that would be in traditional. The big advantage of Roth is you don't have to take RMDs at age 70.5.
You are probably right on the tax rate being lower in retirement, at least initially. If you had $750K at retirement and withdrew $5K/month, assuming 10% RoR you would have ~$1,592,000 at age 71 when RMDs kick in https://www.tsp.gov/PlanningTools/Calcu ... dentAge=50. If you consistently averaged 10% in retirement look at your RMDs at age 71 and beyond: https://www.tsp.gov/PlanningTools/Calcu ... dentAge=50 Much of it depends on your life expectancy, but if either you or your wife dies, the surviving spouse's taxes will likely be more with a single filing status.

If you retire in 7 years, kids will be 15 & 20, one in high school and one half way through college if you are lucky. I would worry more about funding their education without any huge debt rather than giving them a large sum later. Once they are out on their own, your tax deductions will decrease.

sunny
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Re: How to get TSP money to your kids while alive?

Post by sunny »

Mmmmmbeer, You have a good heart.

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TSPTiming
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Re: How to get TSP money to your kids while alive?

Post by TSPTiming »

On the topic of inherited IRAs, this is something to be aware of...

http://www.financialsense.com/new-taxes-iras-pensions

mmmmmbeer
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Re: How to get TSP money to your kids while alive?

Post by mmmmmbeer »

sunny wrote:Mmmmmbeer, You have a good heart.


Thank you Sunny! :)
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