By Mike Miles
October 15th, 2013 | Uncategorized
Q. I have 15 years of federal service and would like to do an early retirement with MRA+10. Would I have to take a reduction in my Thrift Savings Plan, or just my federal retirement only?
A. Mike: I’m not sure what you mean by a reduction in your TSP, but there is no reduction to your TSP account balance due to retirement.
Reg: If you retired under the MRA+10 provision, the only reduction would be in your annuity.
September 23rd, 2013 | Uncategorized
Q. I will have 30 years of service and be 54 years old when I take early retirement in January. Since I will turn 55 in August 2014, will I be able to withdraw without penalty from my TSP even though my minimum retirement age is 56?
A. As long as you separate from covered service during or after the calendar year in which you reach age 55, you will avoid the early withdrawal penalty on withdrawals taken after you separate. Your MRA has nothing to do with it.
August 6th, 2013 | Uncategorized
Q. If I retire early at 50 years of age with 30 years of service under FERS, I understand I’d have to wait until my minimum retirement age to receive the special retirement supplement. What reductions would I have in my retirement annuity? Would I be able to receive monthly Thrift Savings Plan annuity at age 50?
A. Mike: You may use your TSP money to buy an immediate annuity and receive monthly income payments at any age, once you are separated from service.
Reg: If your agency offers you a Voluntary Early Retirement Authority, there wouldn’t be any age-based reduction in your annuity. As noted, you wouldn’t receive the special retirement supplement until you reached your MRA.
July 1st, 2013 | Uncategorized
Q. I am a FERS employee with 29½ years of service. I am 54 years old. If they offer an early-out this year, could I take it without being penalized for the years before age 56? Would I be able to collect the special retirement supplement? Also, will I have a problem if I remove the money I have in my Thrift Savings Plan account?
A. Mike: If you separate from service before the calendar year in which you’ll reach age 55, your TSP withdrawals may be subject to the IRS early withdrawal penalty, but otherwise, you’ll have access to your TSP money through a partial or full withdrawal.
Reg: Because you have at least 25 years of service, you could retire at any age without penalty. However, you wouldn’t be eligible for the special retirement supplement until you reached your minimum retirement age, which in your case is 56.
June 20th, 2013 | Uncategorized
Q. I am a 53-year-old CSRS employee with 31 years of service and I am contemplating taking advantage of any early-out retirement option if offered next year. I have heard rumors that the Internal Revenue Service has a rule in place that states that if I retire before age 59½, it will assess a tax penalty of 10 percent on my annuity amount for having retired early? I realize there is a penalty on the Thrift Savings Plan part, but I have never heard of tax penalty on federal pension due to early retirement.
A. Not true.
March 18th, 2013 | Uncategorized
Q. I have 27½ years in the Postal Service and I am 52½ years of age. If an early-out comes in the next few months, will I get a penalty for leaving? Do I get my special retirement supplement, or do I have to wait for that? Also, do I get to take my Thrift Savings Plan now, or do I wait for that?
A. Mike: The early-out has no effect on the Internal Revenue Service early withdrawal penalty. You will be subject to the penalty until you reach age 59½ unless you qualify for one of the exceptions listed on Page 7 of this notice: https://www.tsp.gov/PDF/formspubs/tsp-536.pdf
Reg: If you were offered an opportunity to retire early, you have the age and service needed to accept it. If you did, you wouldn’t be subject to the age penalty and you’d be entitled to the special retirement supplement when you reach your minimum retirement age, which is 56.
March 11th, 2013 | Uncategorized
Q. I am a GS-04, Step 10. My account balance as of Dec. 31 would provide me with a lifetime Thrift Savings Plan monthly amount of $451. As of this time, I contribute $300 every pay period to TSP. Let’s say my goal is to have a lifetime TSP monthly amount of $1,000. By how much would I have to increase my TSP amount each pay period? I am 52 years old. I am under FERS. If I was offered an early retirement, should I take it? Or should take the chance of getting furloughed for an uncertain amount of time?
A. Unfortunately, it is impossible to answer your question, since the answer will depend upon a number of factors including the rate of return on your TSP investment between now and the time of you buy your annuity, the sequence of the returns and how they align with your savings contributions, the way you manage your TSP account and the annuity payout rate in effect at the time of purchase. You should consider seeking the help of a trustworthy and cost effective investment adviser.
February 11th, 2013 | Uncategorized
Q. I am 55 with 13 years of service. My wife is three years younger than me and will work three additional years — until I am 65.
My Thrift Savings Plan balance is approximately $200,000, and I hope to retire at 62. My wife and I have other investments of approximately $300,000, totaling $500,000 (mostly 401(k), but approximately 20 percent Roth).
I understand that when I am retired and after we reach the “threshold,” I will pay one of every two dollars made. Is this true for dollars dispersed from Roth accounts? I understood them to be “tax-free.”
A. Distributions from a TSP account, Roth or traditional, whether or not they are taxable, do not count as earned income for purposes of offsetting Social Security benefits.
January 28th, 2013 | Uncategorized
Q. I have been contributing to the Thrift Savings Plan for a number of years. I am a GS-4. I will have 28 years of federal service in June. In the beginning, I started contributing $10 (twice a year), then $25 (a year). Beginning last May, I started contributing $50 to the TSP out of my paycheck each pay period. At this time, I have no plans on retiring. I was hired under FERS. However, with furloughs, cutbacks and early retirements, should I keep increasing my TSP by $50 each year, or should I increase it by either $75 or $100?
A. You should contribute as much to the TSP as you can afford to commit to retirement savings.
January 21st, 2013 | Uncategorized
Q. I will be retiring Jan. 31 from the Postal Service. In May, I will receive $10,000 and in May 2014, I will receive $5,000. Can this compensation be used to fund an IRA in years 2013 and 2014 even though I will be retired and not working another job? Is this considered earned income? I know federal and state tax will be deducted. I don’t know yet if Social Security will be deducted, too. What are your thoughts on this?
A. I believe that these payments are considered retirement income, and, therefore are not considered the basis for IRA contributions, but you should consult a qualified tax preparer to be sure.