Ask The Experts: Money Matters

By Mike Miles

Loan down payment

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Q. I am a FERS employee eligible for a TSP residential loan of $23,000. If I request this amount for a primary-residence home purchase, would my down payment and closing cost need to be at or above this amount of $23,000 on my signed purchase contract? Not sure if I will put down 5 percent (13K) or 10 percent (26K). If I put 5 percent on purchase contract, will TSP decline the request for the full $23, 000 loan? I don’t want to write 10 percent on purchase contract if I am not going to put quite that much down, however I’m worried if I only say 5 percent that the loan won’t be approved for $23,000. Can you please explain? I could not find anything in the loan documents on this topic. Read the rest of this entry »

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Retirement options

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Q. I am 62 and a FERS employee. Can I retire with my FERS annuity and TSP and wait until my full retirement age of 66? I do not plan to work  after I leave.

A. Yes.

 

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TSP withdrawal penalty

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Q. Is there a penalty for taking a lump sum TSP balance out at retirement for FERS employee to purchase a home? I may retire at age 56 or 57 with 30 years of federal service. If I decide to take my lump sum at retirement, will I be penalized? How much would come out if the amount is $170,000 right now? Read the rest of this entry »

TSP annuity taxation

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Q. I retired 2+ years ago under FERS with a substantial TSP account that I have not touched. I am looking at purchasing an annuity through TSP versus regular payments based on life expectancy (essentially the IRS required minimum withdrawals that I must start next year). I understand how the RMD is taxed. How will the annuity be taxed? Is there a source that explains the calculation? Read the rest of this entry »

Social Security reduction

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Q. I’ve read about the Social Security reduction if your income is above a certain amount. Does the calculation for that amount include the FERS pension and TSP annuity payments? In other words, does the Social Security Administration consider my pension and TSP payout to be “income” they will reduce against? Or is the reduction only against “wages” from actual employment income after you reach Social Security retirement age? Read the rest of this entry »

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Loans at retirement

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Q. I plan on retiring in August with 31 years FERS service at MRA. I have an outstanding loan of $15,000. I know they will report it as income earned. Will I have to pay a penalty since I will only be 56 on the balance I owe? Read the rest of this entry »

FERS disability process/TSP withdrawal

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Q. I am 64 and have 4.5 years in FERS. I want to know when i can fully withdraw my TSP? I have asked the base. I have called BEST and I have called OPM. I was told DFAS submits a code in an internal software system. So does that happen six months down the road when my disability retirement is approved? Read the rest of this entry »

TSP withdrawal

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Q. I am an Air Reserve Technician and 53 years old. I have lost my military requirement at no fault of my own, and now I am being made to retire from the civilian side (FERS). I have a total of 20 years. Can I withdraw all of my TSP from the civilian TSP and if so, what is the early withdrawal penalty and taxes associated with doing so? I am looking at paying off 50 percent of my debt. My TSP is around 75,000.

A. Since you are separating from TSP covered service before the calendar year in which you reach age 55, you will be subject to the 10% early withdrawal penalty unless you meet one of the other exceptions listed on Page 7 of the notice posted at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.

 

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FERS retirement

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Q. I have two years of temporary services. What are the pros and cons of buying back the temp time? I am approaching my 27th year of federal service. I came in under FERS; at what age can I retire and get my TSP monies without being penalized?

A. You may avoid the early withdrawal penalty on TSP distributions at any age if you meet one of the exemptions listed on page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf. One of these exemptions is for those who retire during or after the calendar year in which they reach age 55.

401(k) rollover

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Q. I am eligible to buy 12 years of military service credit for my civil service retirement. I am curious if I can take a 401(k) from a previous job and roll it over into the FERS system without a tax penalty. Can you help me with this?

A. You may not.