By Mike Miles
October 28th, 2013 | Uncategorized
Q. I am 58½ and a federal employee. Can I take all or part of my Thrift Savings Plan and move it to a self-directed IRA? Or do I have to wait until I am 59½? How much tax will I have to pay on this?
A. You may not take an in-service withdrawal for rollover to an IRA until you reach age 59½.
October 7th, 2013 | Uncategorized
Q. I worked in the Veterans Affairs Department (CSRS) from 1981 until 1985 and then left federal service and withdrew my retirement. I re-entered federal service in 2007 (CSRS Offset) and have enough money in my Thrift Savings Plan to pay the redeposit for my time from 1981 until 1985. Can I switch over the tax-deferred TSP funds to CSRS without having to pay taxes on the transfer? I know I can make an age-based (age 67) in-service withdrawal into a qualified trust or an eligible retirement plan (as defined in IRC 402 (c) (8)). Is CSRS considered an “eligible employer plan” for such a rollover? And finally, how do I make such a redeposit?
A. You must use after-tax money to make the CSRS redeposit, so a tax-deferred rollover from the TSP will not be allowed.
June 10th, 2013 | Uncategorized
Q. I am a Postal Service employee who has civil service retirement and has been on workers’ compensation for several years now and probably will not go back to work. Can I get my Thrift Savings Plan money now as payments or do I have to retire first? Also, how can I add money into my TSP if I can’t take it out?
A. As I understand it, unless you have separated from covered service, you will be subject to the TSP’s restrictions for in-service withdrawals. You should call the Thrift Line to be sure, however.
May 9th, 2013 | Uncategorized
Q. If I start taking my retirement now at 62 — FERS, Thrift Savings Plan payments and Social Security — and end up being picked back up at some point in federal service: I understand my FERS benefits would be cut by the amount I make in a new job. What about TSP payments? Are they exempt from penalties of re-employment?
A. If you are rehired, your automatic monthly payments will stop and you will be subject to the in-service withdrawal rules.
March 21st, 2013 | Uncategorized
Q. When retiring, can I take a large sum of my Thrift Savings Plan out before starting my monthly allotment with the remaining amount?
A. Yes, as long as you haven’t taken an age-based, in-service withdrawal before you retire.
January 28th, 2013 | Uncategorized
Q. I am 62 years old and still a federal employee (for the next several years). I am thinking of withdrawing $100,000 of the $250,000 I have invested in Thrift Savings Plan. The purpose behind this withdrawal is to save paying federal taxes on this amount. That is, we will be selling an investment property that has $100,000 in “unrealized tax losses” and we should be able to offset the taxes owed on the $100,000 TSP withdrawal with the $100,000 loss from the sale of the property.
I am confused by a statement on the TSP website that says if you make an age-based withdrawal, “you will lose the opportunity to make a partial withdrawal from your account once you are separated from federal service.” What does that mean?
After the $100,000 withdrawal, we will still have $150,000 in the TSP account. Does “losing the opportunity to make a partial withdrawal once separated from federal service” mean we can withdraw only the required yearly amount once I reach 70½ and can make no other withdrawals before that time?
Does it mean that we could not, in the future, withdraw another $75,000 if we needed/wanted it?
Does it mean we could withdraw only the whole amount ($150,000) left in the TSP account?
A. You are allowed only one partial withdrawal from your TSP account. After that, your only option is a full withdrawal, which can be in the form of monthly payments or a lump sum, or monthly payments ending in a lump sum. Before you make your age-based, in service withdrawal you should consult a CPA to make sure it will work. Your withdrawal will be considered ordinary income, and not capital gains, for tax purposes.
January 23rd, 2013 | Uncategorized
Q. I am planning on doing an age-based in-service withdrawal of all of my funds prior to retiring. I have a 10 percent contribution going into my Thrift Savings Plan account. Do I need to stop the contributions before withdrawal to make sure no more funds are put into my account after the fact? Or are they automatically turned off once my request is processed?
A. You’ll need to stop your contributions.
January 21st, 2013 | Uncategorized
Q. I have a friend who has been receiving workers’ compensation benefits for about 25 years but is not yet separated from service and worked under CSRS. Can he apply to the Office of Personnel Management to receive the monies in TSP in a lump-sum payment without having to retire? Or will he have to apply for disability retirement first?
A. As long as he is employed, the in-service withdrawal rules will apply.
December 14th, 2012 | Uncategorized
Q. I am a FERS employee contributing to the Thrift Savings Plan. At the recommendation of a pre-retirement seminar, I am looking at a one-time in-service withdrawal of $100,000 into a Roth IRA. I realize that it will add $100,000 to income for 2012, but this is the year my husband’s business is losing money anyway. We intend to pay taxes now (presumably when they are lower, though my income will drop significantly when I retire) and not pay taxes on future earnings. Smart or dumb?
A. You shouldn’t make that move without a thorough analysis of the tax implications using pro-forma returns and consideration about what will be done with the money in the Roth IRA. This is a complex decision, and you should be careful to avoid taking “advice” from anyone with a conflict of interest in the matter. I’d stay put unless you make sure that it is in your best interests to make the move. The odds are that it will be a dumb move, but it’s possible that it could be an opportunity.
December 10th, 2012 | Uncategorized
Q. I am 46 with 22 years of service, and have been told that I will soon receive a letter of directed reassignment to a job in my same grade far outside my commuting area. When the letter arrives, if I should decline to move to the new position, what are my options for drawing retirement? How about insurance? Severance pay? What about my 401(k) in the Thrift Savings Plan? My performance ratings are not an issue.
A. Mike: Your circumstances will not affect the usual rules that apply to your TSP account. As long as you remain employed, you will be subject to the in-service withdrawal rules described at https://www.tsp.gov/planparticipation/inservicewithdrawals/basics.shtml. If you separate from service, the rules described at https://www.tsp.gov/planparticipation/withdrawals/accountOptions.shtml will apply. If you separate from service before the calendar year in which you reach age 55, you will be subject to the Internal Revenue Service’s early withdrawal penalty unless you meet one of the exceptions specified on Page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.
Reg: Because you wouldn’t meet the age and service requirements to retire, you’d only have one option. If you didn’t take a refund of your retirement contributions, you could apply for a deferred annuity at age 60.
You would be entitled to severance pay only if you lost your job through no fault of your own. However, if you were to resign or decline a reasonable offer, you wouldn’t. A reasonable offer is defined as one that is in the same agency, in the same commuting area, of the same tenure and work schedule, and not more than two grades or pay levels below your current position. Note: If you are covered by a mobility agreement, the reasonable offer exception wouldn’t apply.
You would be given a month of free Federal Employees Group Life Insurance and Federal Employees Health Benefits insurance coverage. At the end of that period, you could elect private life insurance coverage at your own expense. You could also elect to continue your health insurance coverage for up to 18 months under the temporary continuation of coverage provision. For that coverage you would pay 100 percent of the premiums, plus 2 percent for administrative expenses.