Military Time buy back for GS retirement/using IRA?

[muddywings]

Been digging through google now for a while without a clear answer.
I finally weaseled my way in the federal GS system after 2.5 years as a contractor. Really, the only reason was so that I could use all that military time (12 years) towards some type of retirement. I just sent in my paperwork to see how much I earned while in the military and I'm sure it will take some time before it comes back.
In the meantime, I wanted to know if anybody here has done this AND has anybody used their IRA to buy back the time vs out of pocket or payment plan. I took quite a paycut to move from contractor to GS and while my wife is in school full time I really can't trim to much from my monthly budget. Was hoping to just use my IRA, pay the tax but not the penalty for early withdraw.
Any ideas???

[jerrymrc]

Just do the payment plan. How much ya earned is easy. Just look at that sheet the SS sends you. It will have your base pay only and that is what the 2% is calculated on.

[Malachai]

What Jerry said. Dependent upon your budget and the length of time you're looking at, the payback can be as little as $25/pay period, iirc.

[Hoser]

Without a doubt, buy back your time. Cant hurt, will help.

[Dave]

What Jerry said. Dependent upon your budget and the length of time you're looking at, the payback can be as little as $25/pay period, iirc.

This is what I did when I started with DOI, $25 per pay period. I only had 7 years to payback though.

The laws governing withdrawals from IRA's can get pretty harsh. You may want to roll over to your TSP and after that take a TSP loan at the about 1% interest. That way as long as your payments stay current you won't have a tax hit.

[muddywings]

This is what I did when I started with DOI, $25 per pay period. I only had 7 years to payback though.

The laws governing withdrawals from IRA's can get pretty harsh. You may want to roll over to your TSP and after that take a TSP loan at the about 1% interest. That way as long as your payments stay current you won't have a tax hit.

I know you can early withdraw w/o penelty for school. Was hoping to be able to do the same to take from one retirement (IRA) and drop it into another retirement. It's 3% of what I earned while in and I'm guessing I'll owe about $10k from the rough math i applied and that is before they tack on the interst (been out for more than years) so ouch.

[jerrymrc]

I know you can early withdraw w/o penelty for school. Was hoping to be able to do the same to take from one retirement (IRA) and drop it into another retirement. It's 3% of what I earned while in and I'm guessing I'll owe about $10k from the rough math i applied and that is before they tack on the interst (been out for more than years) so ouch.

Here is a thought. Years ago when i got out I tried to find a reserve unit. Back them i quickly realized that what I wanted (deployments) was not going to happen.

Fast forward. Had I got out at 20years I still would have had to work and hope for some sort of additional funds. So now I am 54 with 33 years of service. I would like to go to 59 but I can retire at 56. The second ya can put 5% into TSP since the .Gov will add another 4%.

[patrick0685]

Here is a thought. Years ago when i got out I tried to find a reserve unit. Back them i quickly realized that what I wanted (deployments) was not going to happen.

Fast forward. Had I got out at 20years I still would have had to work and hope for some sort of additional funds. So now I am 54 with 33 years of service. I would like to go to 59 but I can retire at 56. The second ya can put 5% into TSP since the .Gov will add another 4%.

its officially 5% they add but the 1% is free no matter what, put the 5% in so you can get all of the .gov match just learn to live without your 5% and your retirement will thank you, everyone i know has bought back their time

[dogbreath650]

Been there done that - buy back is a great deal as is the TSP loan. IRA withdrawel sucks you pay penalties that keep adding up, dont go that way...

[cstone]

Jerry is absolutely spot on. Once you get the amount, get on the payment plan and buy it back early in your career. It won't get cheaper later down the road.

As for TSP, put in as much as you can, as soon as you can. Tax deferred investing, beginning at the start of your 25+ years of service will help more than you can know. Every year the amount that you can put into your TSP goes up, and I recommend you put in as much as you can afford. Back when we got raises, if you used half your raise to up your percentage going to TSP, you didn't even notice that you were increasing your retirement funds.

Make a habit of examining how your TSP is balanced every year. Set your goals early, depending on your family needs and where you would like to be in 10 or 15 years. Just get used to moving some of the funds around between all of the different options. TSP has done a great job through their web site in providing information about past performance and the goals of the different funds. Use that information to make the best decisions for you. Don't get caught just putting all of your TSP in one place and letting it sit there. You don't have to micro manage it every month, but don't let it go more than a year without taking a look at where things are and where they are likely to be headed in the next 12 months.

For the cost of managing the funds, IMO, TSP has done a very good job of providing a variety of funds and a simple opportunity for non-Wall Street savvy investors to put money away for our future.