By Mike Miles
March 18th, 2014 | Uncategorized
Q. I am a FERS employee (6c law enforcement coverage) planning to retire in January 2015 after 31 years in federal law enforcement. I plan to build my retirement home soon after and have need of a partial withdrawal from my Thrift Savings Plan at retirement. Is this partial withdrawal subject to the 10 percent IRS tax under the one time withdrawal provision, and if so, do I have any option to avoid that penalty while still accessing about a third of my account?
A: If you retire during or after the year in which you reach age 55, you will be exempt from the early withdrawal penalty on any kind of withdrawal. If you retire before that point, you’ll be subject to the penalty until you reach age 59 1/2 unless you qualify for one of the exceptions listed on page 7 of the notice at: https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.
March 17th, 2014 | Uncategorized
Q. I just turned 57 in January and am planning on retiring on June 1, 2014. I am CSRS and currently working with the U.S. Postal Service. I was hired by the Postal Service in March 1982 and have met my minimum retirement age and time in service. I also have 4 years prior military service in the Navy from 1976 to 1980 on active duty. Will I be penalized if I make a TSP withdrawal prior to turning age 59 1/2 years of age?
A. No. You will have retired after the calendar year in which you reached age 55 and, therefore, qualify for one of the exceptions to the early withdrawal penalty.
February 21st, 2014 | Uncategorized
Q. I retired from an air traffic control job at age 53. I am receiving monthly payments based on my life expectancy. I will be age 55 in April. Can I take a partial withdrawal? If not, are there any options? I need to access more funds. Will there be a tax penalty on the amount I have received? Will my partial withdrawal be penalty-free now that I am 55? Are there other options, such as increased monthly payments?
A. You may not take a partial withdrawal once monthly payments have begun. You may increase your monthly payment amount using Form TSP-73 or you may request a final withdrawal, but making any change to the series of substantially equal periodic payments before you reach age 59½ will subject all of your early distributions to the early withdrawal penalty.
The rules for all of this are complicated. You should consult a CPA before proceeding.
February 19th, 2014 | Uncategorized
Q. I am a FERS employee with a retirement date of May 2018. I will reach my minimum retirement age of 56 at that time, with 36 years of service. Am I eligible, at that point, to receive nonpenalized withdrawals, either payments or lump sum from my Thrift Savings Plan account? Or do I have to wait until I reach age 59½ to not be penalized?
A. You will be exempt from the early withdrawal penalty under those circumstances.
February 17th, 2014 | Uncategorized
Q. Whether I retire sooner or later than the year I turn 55, what kind of tax implications will I have in taking a partial lump sum or the whole balance lump sum for something like a vacation home?
A. If you retire from Thrift Savings Plan-covered employment during or after the calendar year in which you reach age 55, you will be exempt from the Internal Revenue Service 10 percent early withdrawal penalty for any withdrawals you take.
February 17th, 2014 | Uncategorized
Q. I will be 52 years old March 9. I am covered under FERS, and I have 31 years of federal service. If my base offers an early-out this year, I plan to take it.
I have a substantial balance in the Thrift Savings Plan and would like to withdraw it in its entirety when I take the early-out so I can invest it in my daughter’s business.
1. Will I be penalized for withdrawing my TSP funds early? If so, how much? I know I will be taxed, and I am OK with that. My husband plans to keep working. He is a GS-12, retired military and we have no bills, so we will be fine.
2. I know I cannot draw Social Security, and I don’t plan to do so until I reach the required age. In the meantime, will I be eligible for the special retirement supplement if I retire now? If not, at what age will I be eligible, if at all?
A. Mike: Unless you are sufficiently disabled or have massive medical bills, you will pay the 10 percent early withdrawal penalty on the lump sum.
Reg: If you accept your agency’s offer of early retirement, you’d be entitled to the special retirement supplement when you reach your minimum retirement age, which is 56. The SRS will end at age 62, whether or not you apply for a Social Security benefit.
February 17th, 2014 | Uncategorized
Q. I am under FERS and my minimum retirement age is 56. I plan to take regular retirement at age 58 with 34 years of service. I would like to take level monthly payments, rather than a Thrift Savings Plan annuity, as my TSP withdrawal choice starting immediately upon retirement. Can I do this without incurring the 10 percent penalty for being under age 59½?
A. If you retire from federal service at age 58, you will be exempt from the early withdrawal penalty for TSP withdrawals of any kind.
February 12th, 2014 | Uncategorized
Q. I retired from civil service in January 2012 with 25 years contributing to CSRS and FERS. I will be 59½ in April. I plan to make a partial withdrawal and have the balance as monthly payments when I turn 60. Will I incur an additional 10 percent early withdrawal penalty before age 59½ since I retired or do I need to wait until 59½? Do I need to wait until 60 to begin receiving monthly payments, or can that start any time?
A. Since you retired after the calendar year in which you reached age 55, your Thrift Savings Plan withdrawals will not be subject to the early withdrawal penalty. You may withdraw your money at any time.
February 4th, 2014 | Uncategorized
Q. I retired under a Voluntary Early Retirement Authority from the Department of Agriculture in July at age 56. I chose to receive monthly payments from my Thrift Savings Plan account. I would like to pay off my mortgage and a student loan. The only thing I can come up with is to transfer my TSP funds into an IRA and withdraw from the IRA. If I roll my TSP funds into a traditional IRA and make withdrawals before 59½, will I be subject to the 10 percent early withdrawal penalty?
A. Yes, I believe you will, but you should check with your tax preparer to be sure.
January 29th, 2014 | Uncategorized
Q. I am a 56-year-old federal employee with six years of service. I have traditional and Roth Thrift Savings Plans. I also have a traditional IRA with TIAA-CREF. Since my budget is too tight to take advantage of the full federal matching amount, can I use my TIAA-CREF IRA funds to maximize my federal match? If I roll over TIAA-CREF funds into my traditional TSP, will these funds receive federal matching?
Also, I understand early withdrawal of traditional TSP funds is subject to income tax, but if I roll over TIAA-CREF funds into my traditional TSP, are withdrawals at age 56 penalized?
A. Your transfers into the TSP will not be matched. If you transfer the IRA into the TSP, it will, from that point forward, be treated just like your other TSP money. Any exemption to the early withdrawal penalty for which you may qualify will apply to all of your TSP money, regardless of its original source.