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

Post by evilanne »

How old are your kids now?

crondanet5
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Re: How to get TSP money to your kids while alive?

Post by crondanet5 »

What would Dave Ramsay say?

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

Post by mmmmmbeer »

evilanne wrote:
mmmmmbeer wrote:So maybe none of us are tax attorneys, but I have sort of a question.

Say the numbers hold, and I have 2 million in TSP @ 65 years old.

How do I get $500k to each of my two kids without crushing them and us in taxes?
Current gift amount of $14K/year/person is the only way you can give them money without an tax impact on them. If you have grandchildren, you can gift to them or set up a college fund.

You have to pay taxes on whatever amount you withdraw from traditional TSP balance. Contributing to Roth TSP and paying taxes while working will give you more flexibility in managing any tax impact on you later and there is no tax on the Roth withdrawal of earnings and beneficiaries have no tax impact with Roth.

Have you looked at TSP Income Calculator? If you wait until RMDs are required, you will have to withdraw ~ $75K+ annually, assuming 5% RoR & $2M at age 65: https://www.tsp.gov/PlanningTools/Calcu ... dentAge=65 Roth is not subject to RMDs. Since you will retire much earlier, it makes more sense to give them a smaller amount over many years than a big amount all at once. With traditional TSP, beneficiary can transfer to inherited IRA and make withdrawals base on their life expectancy so they don't get hit with a huge tax bill all at once. I would make sure your beneficiaries know how to handle any inherited retirement funds.


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

Post by mmmmmbeer »

evilanne wrote:How old are your kids now?


13 & 8
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mmmmmbeer
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Re: How to get TSP money to your kids while alive?

Post by mmmmmbeer »

crondanet5 wrote:What would Dave Ramsay say?


Dave would tell me to pay off everything and be debt free... pretty much am except a little travel card the wife and I use. That should be paid off again in a few months.

Then do the fully funded 6 month emergency fund.

Then hammer the mortgage.

Then... uhh... haha... I can't remember, it's been like 10 years since Financial Peace University!

Wait... wait... he would tell me not to invest anything into TSP until after I was totally debt free!
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Midway
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Re: How to get TSP money to your kids while alive?

Post by Midway »

Someone sent this to me but did not offer any specifics: "You can if you know the right strategy." Hopefully they will volunteer more information to this topic.
Seems like PoorFed is on to something. It would take a couple of years to get it done and you would still have to pay taxes on your (non-Roth) TSP withdrawals. Professional advice may be warranted.

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

Post by mmmmmbeer »

Midway wrote:Someone sent this to me but did not offer any specifics: "You can if you know the right strategy." Hopefully they will volunteer more information to this topic.
Seems like PoorFed is on to something. It would take a couple of years to get it done and you would still have to pay taxes on your (non-Roth) TSP withdrawals. Professional advice may be warranted.


Oh yeah buddy... I think it would be best to speak with a estate planner type lawyer, but what fun would that be for us if I already had the answers! Haha.... no good discussion to be had like that. Prior to retirement I will definitely go in and speak with someone to let me know my best options.

Rest assured I'll post all my findings on here for you gals and guys when I find out what's what.
Those who 'abjure' violence can do so only because others are committing violence on their behalf.

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

Post by ArrieS »

mmmmmbeer wrote:Really... I want to just to be able to give them a leg up you know? How nice would it be.... to be in your early 30's or whatever..... and have no mortgage? No student loan debt? How much further on in the big scheme of things would that help them be?

I'm just saying... my single mom (God Bless her) had nothing to give us. I've worked my tail off for everything since I was 15.

Now that being said I want them to learn to work hard... but what a cool gift that would be... to do the Big Fat Greek Wedding thing. "Your parents bought us a house?!"

Anyway... If I have 2 million... who cares... I can't take it with me and I would love to see them enjoy it when young, when they need it.


Then explore the options of paying their bills for them. They want a house, be a co-signer, and pay the mortgage. That's a transfer and its a tax shelter because profits from selling a house up to a certain amount are tax free.

I'm not a tax adviser, so please double check this, but last I checked there are many bills you can pay that won't result in a tax bill for them. Buy their car insurance and/or pay their cell phone bill.

I'll be honest, I think you're taking a short sighted approach. Keep your investments in a tax shelter. They will grow, and create a will that will plan for the long term. You want to help your kids and grand kids? Great, but what about the next generation and the one after that?

When I die I'm rolling it into a trust with plans to pay out for each generation. An old Greek saying is you die two deaths. First when you physically die and the second when the last person speaks your name. I'm going to make sure my great great great great great great great great great great great grand kid says thanks to me for the free college. God willing it's in person too, got my fingers crossed for cryogenics.
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upsydaisy2
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Re: How to get TSP money to your kids while alive?

Post by upsydaisy2 »

mmmmmbeer wrote:Really... I want to just to be able to give them a leg up you know? How nice would it be.... to be in your early 30's or whatever..... and have no mortgage? No student loan debt? How much further on in the big scheme of things would that help them be?

I'm just saying... my single mom (God Bless her) had nothing to give us. I've worked my tail off for everything since I was 15.

Now that being said I want them to learn to work hard... but what a cool gift that would be... to do the Big Fat Greek Wedding thing. "Your parents bought us a house?!"

Anyway... If I have 2 million... who cares... I can't take it with me and I would love to see them enjoy it when young, when they need it.


You seem like a loving and generous parent. I cringe whenever I hear about a parent wanting to help and support their kids, financially. It can be never ending thing and soon you'll be too broke to retire, your kids won't help or respect you. If I were one of your kids, I wouldn't want that kind of help from you. I became very independent and stubborn since I was adopted from Korea as a child. It would be nice to have everything paid for, but I would not be the person I am today. It sounds like your kids mean the world to you otherwise you wouldn't be doing this...lucky kids. Just make sure you and your wife are able to retire comfortably down the road. There's a lot of good advice on here. Wish you the best.
Last edited by upsydaisy2 on Fri Aug 04, 2017 1:17 am, edited 3 times in total.

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

Post by Scarfinger »

Could the money be left to them in an estate? So that they would get money yearly based on the terms that the estate was set up. And in turn could the grand-kids be left some inheritance if the account was still solvent?

I listened to a radio show where a fund was set up for the grand-kids when the Grandmother passed. I don't remember what it was called.
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ArrieS
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Re: How to get TSP money to your kids while alive?

Post by ArrieS »

mmmmmbeer wrote:
evilanne wrote:How old are your kids now?


13 & 8


What!

Open an a ROTH IRA for them now and fund it.
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

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

Post by mmmmmbeer »

ArrieS wrote:
mmmmmbeer wrote:
evilanne wrote:How old are your kids now?


13 & 8


What!

Open an a ROTH IRA for them now and fund it.


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

Post by ArrieS »

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.
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

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

Post by mmmmmbeer »

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.


Wait...for some reason I thought that 18k was the most you could put deferred into anything... total.
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ArrieS
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Re: How to get TSP money to your kids while alive?

Post by ArrieS »

mmmmmbeer wrote:
Wait...for some reason I thought that 18k was the most you could put deferred into anything... total.


Sorry, I thought you said you were putting 24k. You can do an additional 6K as catch-up contributions if you are the age of 50 or older.
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

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