By Mike Miles
October 3rd, 2013 | Uncategorized
Q. I recently lost my job and withdrew my entire Thrift Savings Plan savings. I know that there is a 20 percent penalty for early withdrawal that they took out. Also, another 10 percent penalty that they hit you with at the end of the tax year. Is there any way I can lessen the blow? Are there any exemptions that I could put that money to, such as paying of my son’s college loans, home improvement or repairs?
A. The 20 percent taken from the distribution was withholding against your federal tax liability for the year of the withdrawal. The 10 percent early withdrawal penalty, if applicable, will be calculated and due when you file your tax return for the year. The exceptions to the early withdrawal penalty are listed in the left-hand column on Page 7 of this notice: https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.
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