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Federal Employees Benefits Q &A

Do you have questions about your federal employee CSRS or FERS pension/annuity or federal employee retirement planning? Concerns about your Thrift Savings Plan (TSP) account or what about federal employee pay and leave issues?

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The Q&A forum is moderated by Ed Zurndorfer -- an expert on federal employee benefits -- and a Certified Financial Planner, chartered life underwriter and chartered financial consultant in Maryland.

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civan  
#1 Posted : Monday, December 03, 2018 2:29:21 PM(UTC)
civan

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Location: Ohio

I will be retireing on Jan 3, 2019 under CSRS. My only "earned" income for 2019 will be my annual leave lump sum payment. Can I use that payment to fund a 2019 IRA (either Traditional or Roth) for myself or my wife? Thanks.
Ed Zurndorfer  
#2 Posted : Tuesday, December 04, 2018 1:32:29 AM(UTC)

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Absolutely. Since your lump sum payment for unused annual leave is considered earned income and you will receive the payment sometime in early 2019, you can use that payment as a basis for making a 2019 IRA contribution (traditional or Roth) for yourself and your spouse.
wyre  
#3 Posted : Wednesday, December 12, 2018 12:10:51 PM(UTC)
wyre

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It's my understanding that pension payments after retirement are NOT considered 'earned income' ... but, assuming you have enough 'earned income' from other sources (such as the annual leave lump sum payment mentioned above) to qualify for a ROTH , would that year's pension payments be included as part of one's modified adjusted gross income when calculating possible contribution limits for a Roth IRA ? Similarly, would RMD withdrawals also be part of the 'modified adjusted gross income?

For 2019, the modified adjusted gross income for singles must be under $137,000; contributions are reduced starting at $122,000. For married filing jointly, the MAGI is less than $203,000, with phaseout starting at $193,000. If you are lucky enough to have a fairly substantial pension (and IF that money counts toward the MAGI calculation) plus a large amount of annual leave and/or RMD, it seems this might make someone ineligible for a full ROTH. Am I thinking this through correctly?
Ed Zurndorfer  
#4 Posted : Wednesday, December 12, 2018 1:54:04 PM(UTC)

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Yes, the lump sum payment for unused annual leave is considered “earned income” and therefore may be used as a basis for making an IRA contribution. And yes, a traditional IRA RMD and/or qualified retirement plan RMD is included in one’s modified adjusted gross income.
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