By Mike Miles
In-service withdrawal
December 30th, 2011 | Uncategorized
Q. Can I do an in-service withdrawal for a down payment on a house?
A. Only if you are at least age 59 1/2 and have not already taken one, or you can demonstrate financial hardship.
Tags: in-service withdrawals
Annual leave to TSP
December 28th, 2011 | Uncategorized
Q. There was a proposal earlier this year to amend the Federal Employees Retirement System so that retiring employees could contribute their annual leave balance to the Thrift Savings Plan. Has anything happened on it?
A. It appears to be dead.
TSP advantages
December 28th, 2011 | Uncategorized
Q. I recently retired at age 57 due to the mandatory law enforcement officer provision. Are there any additional options or advantages in receiving payments from my Thrift Savings Plan at age 59½ compared to now?
A. No.
Tags: law enforcement officer, TSP
Finding a lawyer
December 22nd, 2011 | Uncategorized
Q: I just turned 49 and I have been a law clerk for a federal judge for 22 years. I have been asked to either submit my resignation effective in several weeks or be terminated. Which option should I choose? There are further complications/options available which are too lengthy to get into. I would like to retain the services of an expert, but I don’t know who to contact. I need help quickly as clock is ticking for possible break in service.
A: It sounds like you should start by talking with a lawyer who specializes in federal employment matters. Put “federal employment lawyer” into an Internet search engine and you will come up with some candidates to interview.
Tags: Early termination
Withdrawal waiting period
December 21st, 2011 | Uncategorized
Q: I retire on Dec. 31. How soon after I retire do I have to wait to take a partial withdrawal from my TSP account?
A: There is no waiting period.
Tags: retirement, TSP withdrawal
TSP annuity at MRA
December 21st, 2011 | Uncategorized
Q: I’m an Air National Guard technician under FERS with 34 years service. My first nine years were active-duty Air Force service, which I have bought back. I have a personal loan through TSP that will still have a balance of about $6,000 when I intend to retire next July at my MRA of 56. I intend to depend significantly upon TSP, $2,500 a month, until I reach the age of 59 3/4, when my military Guard retirement will start paying out. At that point, I’ll minimize my TSP annuity. Will the outstanding loan balance have any effect on my planned TSP retirement annuity? Will TSP allow a $2,500-a-month annuity, $30,000 a year, for four years even though my civilian TSP balance is about $260,000?
A: Your unpaid loan balance will be declared a distribution from your account shortly after you separate from service, if not fully repaid by that time. The unpaid loan will be a permanent reduction to the value of your TSP account. An annuity must be based on your life expectancy and once purchased, is irrevocable and unchangeable in the manner you’ve suggested. You may set monthly withdrawals against your account in any amount you wish, and may change those withdrawals once each year, or terminate them entirely by withdrawing the balance of your account assets.
Tags: loans, TSP annuity
State tax
December 19th, 2011 | Uncategorized
Q: Is the TSP federally approved? The reason I need to know this is that I live in New York and when you are 59½ you are able to exclude $20,000 single, $40,000 married, of your annuity for New York tax purposes.
A: This is a question about state tax law – whether the TSP meets a certain definition established by the state of New York – and is one for a New York CPA.
Tags: TSP
Partial TSP withdrawal
December 19th, 2011 | Uncategorized
Q: I retire Dec. 31. How soon do I have to wait to take a partial withdrawal from my TSP account?
A: If you’re age 59 1/2 or older and haven’t done so in the past, you may request an age-based, in-service withdrawal immediately. You may also request a load immediately. Otherwise, you’ll have to wait until you are separated from federal service to take a withdrawal.
Tags: retirement, TSP withdrawals
Minimum distribution calculation
December 19th, 2011 | Uncategorized
Q: Does TSP use only one IRS table for calculating Minimum Required Distributions for TSP participants 70-plus years old? My wife is 17 years younger than I am, so we will want to use the IRS table for “Joint Life and Last Survivor Expectancy” (IRS Pub 590, Appendix C), which is available for people whose sole beneficiary is more than 10 years younger. However, my reading of the TSP website materials (pub TSP-775 “Important tax information about your TSP withdrawal and required minimum distributions”) indicates that TSP uses only the “Uniform Lifetime” table for everyone. Is that correct? If so, it would result in significantly greater distributions than I am really required to make, which would make TSP an expensive alternative for me.
A: You’re right. If you’d rather use the Joint Life Expectancy table to calculate your RMD, which will produce a lower distribution, you’ll have to roll your TSP assets into an IRA account. I’m not sure that I agree that the higher distribution rate will make the TSP “expensive”. You’ll pay taxes now that will be due eventually, in any case. Will withdrawing your money now mean that you’ll pay a higher tax rate on the distribution than you will in the future? Who knows? You will definitely pay higher expenses in an IRA than you will in the TSP. The question is whether any tax costs will exceed the expense savings.
Early withdrawal penalty
December 19th, 2011 | Uncategorized
Q: I’m covered by FERS and my agency is offering an early out. I’m at my MRA of 56 with just under 25 years of service. If I separate from service, can I access my TSP, either in the form of a lump sum, monthly payment or a combination of these? And can I do so without the penalty usually levied if a person is under 59 1/2 years old?
A: Since you are retiring from federal service during or after the calendar year in which you reached age 55, you will have access to your TSP account without suffering the early withdrawal penalty.
Tags: TSP withdrawals