By Mike Miles
TSP withdrawal options
January 19th, 2011 | Uncategorized
Q: If you chose the monthly payments option on withdrawing your TSP, can you also take a one-time lump-sum payment?
A: Once you’ve initiated monthly payments, which are considered a form of full withdrawal, you can’t take a partial withdrawal.
Tax on terminal leave payment
November 2nd, 2010 | Uncategorized
Q: In a recent response you said, “Your income will be taxed in the year in which it is constructively received.” What does that mean? If I retire on Dec. 31, 2010, and receive my last paycheck in January, which will include my lump-sum payment for terminal annual leave, isn’t that money taxed as income received in 2011? Will it not be shown as income on the W-2 for 2011, not 2010?
A: It is not unusual for an employer to include income on the W-2 or 1099 for the year in which it was paid, even though the income was not received until the following year. Typically, people include the income on their returns as it is reported by their employer. Since individual taxpayers are taxed on a cash basis, however, they may elect to report the income in the year in which it was constructively received — when the money was made available to them, regardless of when they actually took it. For example, if a check is handed to you on Dec. 31, you have constructively received the payment at that time, even if you elect not to cash the check until Jan. 3 of the following year.
Tags: lump-sum payment, retirement, taxes
TSP withdrawal will be in fixed payments
October 28th, 2010 | Uncategorized
Q: Let’s see if I’ve got this right. If I request monthly withdrawals from my Thrift Savings Plan account and change the amount each year, I’ll be able to receive a monthly check for life and still be able to build my principal, which I can pass on to my children or grandchildren. Does TSP have such a plan as this? What option is it and how does it work? If I need some emergency money, would I be able to make a withdrawal from my principal?
A: You may request a full withdrawal as fixed monthly payments. You set the amount and you may change the amount each year. Once you begin the full withdrawal in this way, any subsequent lump-sum withdrawal must be the final withdrawal of any remaining balance.
Tags: lump-sum payment, TSP, withdrawal
How to invest your annual leave check
October 15th, 2010 | Uncategorized
Q: Since I’m not allowed to deposit my lump-sum annual leave check into my Thrift Savings Plan account, where’s the next best place to put it? Will this amount be considered part of my 2010 income regardless?
A: Generally, I prefer the following order for retirement savings deposits: TSP, deductable individual retirement account, Roth IRA, taxable brokerage account. Your income will be taxable in the year in which you constructively receive it.
Tags: annual leave payment, Individual Retirement Account, IRA, lump-sum payment, Roth IRA, thrift savings plan
TSP split between annuity, lump sum
October 12th, 2010 | Uncategorized
Q: I am 57 years old and I have 34 years of service, including 21 years of active duty in the Navy. I have already paid my military deposit amount in full. My Thrift Savings Plan account has $200,000 in it. If I retire next year, can I get half of that amount in lump sum, and can I invest the remaining $100,000 in an annuity? If I can, when would I start receiving the annuity?
A: Yes, you may request a partial lump-sum withdrawal, if you have not already done so, and then later request a full withdrawal as a life annuity. Your first montly annuity payment should be received within two months of your request as long as the request is complete and there are no problems.
Tags: annuity, lump-sum payment, lump-sum payout, thrift savings plan, TSP, TSP annuity, TSP lump sum
Lump-sum leave payment into TSP?
August 2nd, 2010 | Uncategorized
Q: A few months ago, I read something about federal workers being able to deposit the lump-sum payment for unused annual leave into their Thrift Savings Plan accounts when they retire. Did this happen, or is it just a proposal?
A: A bill (HR 4865) was introduced in March that would allow this rollover, within certain limits, if passed into law. It is still in committee.
Tags: leave payment, leave payment rollover, lump-sum payment, rollover, thrift savings plan, TSP, unused leave