Ask The Experts: Money Matters

By Mike Miles

Lump-sum withdrawal

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Q. Upon retirement, can I elect to take a full withdrawal in the form of monthly payments, and then at some later date choose to take a one-time lump-sum withdrawal? For instance, three years after retiring, can I choose to remove $50,000 if I have never taken a lump-sum amount.

A. Only if the lump-sum is the entire balance remaining in your account.

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Revocable trust

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Q. I am federal employee and plan to retire in about six months or a year. I want to leave the money in TSP when I retire, but want to include TSP in a living revocable trust. I read online that it is not a good idea because the IRS considers that as a lump-sum transfer and I will be taxed at almost 35 percent. But when I consulted an estate-planning attorney, I was told that I can include TSP in the trust, and it does not make any difference in how I withdraw the money. I am confused. Please advise me if it is a good idea to include TSP in a revocable trust or not. Read the rest of this entry »

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Partial lump sum

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Q. How do I request a TSP partial lump sum after age 59-1/2? What forms do I need to fill out, and how long does the process take? I plan to keep working until age 63 and continue contributing to my TSP.

A. Use form TSP-75 to request an age-based, in-service withdrawal. Allow weeks for the withdrawal to be processed.

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One-time withdrawal

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Q. I retire in less than a month under FERS. As soon as I retire, I plan to use the option to withdraw my TSP in monthly increments that I decide every year (I am not using the life expectancy or annuity options). I also want to do a partial withdrawal (not much of it, just enough so I have a good savings account to fall back on). I know I can only do it once. I assumed, or read, that the one time had to be immediately upon separation. I do not really need the partial-withdraw funds right away, but do not want to miss the opportunity to do it. Can you do your once-in-a-lifetime partial withdraw any time after you retire? Read the rest of this entry »

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TSP lump sum

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Q. I am a FERS employee and plan to retire at age 56. Can I take a lump-sum withdrawal from my TSP to pay off my home?

A. Yes, once you retire.

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Monthly withdraw

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Q. I would like to take $3,000 monthly from my TSP when I retire for the first few years, then I start collecting Social Security can I reduce my monthly payment? Then later on change the monthly amount again? I thought I read I can change my TSP payment once a year, but have been hearing from others who have retired you only have a choice of lump sum, annuity, partial lump sum and the rest in monthly payments of your choice, but it stays the same for life. Read the rest of this entry »

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Lump sum, earned income

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Q. I’ll retire under FERS at the end of this year. Will the lump-sum payment for annual leave that I’ll receive early in 2015 would be considered earned income for the purposes of being able to contribute to my non-TSP Roth IRA?

A. No.

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Lump sum, monthly benefit combo

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Q. I reached my MRA last January with 30 years of service. I plan to retire in January. For 2015, I am planning to withdraw $100,000 and then have monthly benefits of $1,000 from my TSP. Can I do that in the same year? Or do I have to wait in 2016 to start my monthly benefit?

A. A partial lump-sum withdrawal and a full withdrawal in monthly payments can both occur in the same year.

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TSP withdrawals without penalty

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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.

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Lump-sum and monthly TSP withdrawals

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Q. I anticipate starting monthly withdrawals from the Thrift Savings Plan in the near future. Sometime after this, I would like to make a one-time lump-sum withdrawal from TSP to pay for my daughter’s wedding. Can I do this? Can I make a lump-sum withdrawal while taking monthly payments, or am I limited to one or the other?

A. You can take the lump-sum partial withdrawal before starting the monthly payments, but not after.

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