Ask The Experts: Money Matters

By Mike Miles

Deferring retirement and moving 401(k)

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Q. If I were to take the MRA+10 option and defer my retirement until I turn 62, can I still move my total thrift savings (401(k)) out of the thrift program?

A. Yes.

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Q. I am a federal employee with the Department of Justice, non-law enforcement, and will have 30 years of service at age 54, approximately two years before my minimum retirement age. Can I leave the government before MRA with 30 years and still be eligible to receive my special retirement supplement and my FERS retirement without a penalty at my MRA? Would I still be able to collect my Thrift Savings Plan, without penalty at my MRA, or would I be required to wait until age 59½?

A. Mike: If you separate from service before the calendar year in which you reach age 55, the early withdrawal penalty rules will apply to your TSP account. You may avoid the penalty by taking a series of Substantially Equal Periodic Payments, however.

Reg: If you left government before reaching your minimum retirement age, you could apply for a deferred retirement. Because you have at least 20 years of service, you could apply for that benefit at age 60. However, as a deferred retiree, you wouldn’t be eligible for the special retirement supplement.

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Deferred annuity

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Q: I plan on taking a deferred retirement at age 54 with 32 years of federal service in May 2012. I have been in the Federal Employees Health Benefits program since 1985. My wife plans taking a job in the federal government prior to me taking the deferred retirement. When she is hired, the plan is for me to transfer to her FEHB.

When I reach age 56 in May 2014, how will the deferred retirement impact the three parts of the Federal Employees Retirement System (basic retirement with high-3, etc.; supplement, which should be 32/40 x what I receive in Social Security at age 62; and Thrift Savings Plan), as well as my FEHB and my sick-leave reimbursement (current projection at 1,400 hours)?

A: Your deferred annuity will have no direct effect on your TSP account. Because you will have separated from service before the year in which you reach age 55, you will be subject to early withdrawal penalty rules until you reach age 59 1/2. You could avoid this restriction if wait to separate until Jan. 1, 2013.

(Read more about this question on the Federal Times Ask The Experts: Federal Retirement blog.)

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