By Mike Miles
April 9th, 2013 | Uncategorized
Q. I will have over 30 years of service when I reach my minimum retirement age of 57. If I retire and start withdrawing Thrift Savings Plan money, will I pay an extra tax for taking out payments before age 59½?
March 26th, 2013 | Uncategorized
Q. I am 47 and hope to retire at my minimum retirement age in nine years. I contribute to both my traditional Thrift Savings Plan and Roth TSP. A publication I read, “Important Tax Information about Payments from Your TSP Account,” says you will not have to pay taxes for Roth contributions if you follow a two-step rule: Hold for five years + age 59½. But I think it also says that if I transfer my Roth TSP out of the TSP when I retire, the monies will not be subject to taxes. Is this correct?
Can I only roll over my Roth TSP and keep my traditional TSP with the TSP or must I roll over both the Roth and traditional? I ask because I would like to keep my traditional TSP where it is and only roll over the Roth to avoid taxes on distributions that occur before age 59½.
A. The five-year + 59½ rule applies only to earnings, but it applies to both your Roth TSP and a Roth IRA account. You may always withdraw your contributions from either account without tax or penalty. You may transfer all or part of your Roth TSP balance to a Roth IRA, if you are eligible for a partial withdrawal, and leave the remainder in your TSP account, using Form TSP-77.
March 19th, 2013 | Uncategorized
Q. I am a letter carrier, age 52, started in 1985 and have 28 years of creditable service.
If I understand what I’ve gleaned from the posts here and the Postal Service were to offer me a Voluntary Early Retirement Authority this year,
1. Would I begin my annuity immediately?
2. Would I have no reductions in calculations of my annuity? (average high-3 x 1 percent x 28)
3. Would I receive credit for half of my sick leave and all of my annual leave? (How are these applied?)
4. Would I receive the special retirement supplement beginning at age 56 (my minimum retirement age), and receive it until I reach age 62?
5. Would I be able to continue carrying my current health and life insurance at non-USPS rates? (I couldn’t find how long these could be carried. Until death?)
6. Could I begin receiving Social Security as early as age 62?
7. Any withdrawal from my Thrift Savings Plan prior to age 59½ would be penalized 10 percent as per Internal Revenue Service regulations? (Can I continue to contribute to TSP after retirement?)
8. As a FERS annuitant, is there no limit to what I can earn after separation from the Postal Service as it pertains to my annuity payment?
9. At age 56 (my MRA), the special retirement supplement from Social Security would begin and would be subject to yearly income limits. Would supplement payments be reduced by approximately $1 for every $2 I earned above that year’s Social Security income limit?
10. At age 65, I’d be eligible for Medicare parts A and B? (Would this affect my health insurance coverage through Federal Employees Health Benefits?)
11. Would there be cost-of-living increases at any point for my annuity?
12. Is there a date during the year that maximizes the benefits of retirement?
Did I get this right, and are there any other things I should know before considering a VERA if it is offered?
A. Reg: 1. Yes.
3. Yes. Half of your unused hours of sick leave would be added to any hours of service that were left over when your annuity was computed. Any additional months created would increase the amount of your annuity. Any unused annual leave would be paid to you in a lump sum at your current hourly rate.
5. Yes. And those enrollments would continue until your death.
Mike: 7. You will be subject to the early withdrawal penalty until you reach age 59½ unless you can qualify for one of the exceptions listed on Page 7 of the notice: https://www.tsp.gov/PDF/formspubs/tsp-536.pdf. You may not contribute to the TSP after you retire, but you may transfer eligible balances into the TSP from other retirement accounts such as IRA, 401(k), 403(b), etc.
Tags: 401(k), 403(b), age, annual leave, annuity, catch-up contributions, cost-of-living adjustment, early withdrawal penalty, FERS, health insurance, income, IRA, IRS, life insurance, lump-sum, Medicare, Minimum Retirement Age, Postal Service, sick leave, Social Security, Special Retirement Supplement, TSP, VERA
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.
February 27th, 2013 | Uncategorized
Q. I am retiring soon (four months) under MRA+10. Will I be penalized for a Thrift Savings Plan withdrawal at my retirement? I will be 56 at the time of retirement. I am moving from my present location to another state and plan to use the better part of it as a down payment on a home.
A. As long as you retire during or after the calendar year in which you reach age 55, your TSP withdrawal will not be subject to the early withdrawal penalty.
February 21st, 2013 | Uncategorized
Q. I am retiring in six months with 30 years under FERS at age 57 (my minimum retirement age). I am planning on using my Thrift Savings Plan to buy a house with equal payments for five years. The payments will start one or two months after retirement. Will I be penalized for early withdrawal because I am not 59½ ? I was under the impression that TSP was considered one-third of my retirement, and that at time of retirement, I would be eligible to withdraw. Is this correct?
A. Since you are retiring during or after the calendar year in which you reach age 55, you will not be penalized for withdrawing from your TSP account before age 59½.
December 3rd, 2012 | Uncategorized
Q. I will be eligible to retire Dec. 4 with both minimum retirement age and years of service under FERS. I would like to wait until Jan. 31 to retire to complete a project. I will have 240 hours of annual leave going into 2013. The combination of my lump-sum payment for my annual leave and my January wage earnings would exceed the Social Security earnings limit for 2013. Since the Social Security earning limit is the same as the FERS annuity supplement earnings limit, would this make me ineligible for the special retirement supplement for 2013?
If I put all of my January wage earnings for 2013 into the Thrift Savings Plan and just receive the lump-sum payment, which by itself is less than the earnings limit, would I be able to collect the special retirement supplement for the rest of 2013 when I retire at the end of January?
A. In general, the earnings limit is based on gross earned income, before deductions for things like TSP contributions, so you can’t reduce the income counted for the limit by deferring it into the TSP. Amounts you are paid after retirement, but that were earned before retirement, are usually considered special payments, which do not count against the Social Security earnings limit. The rules can be complicated, though, and you should consult a qualified tax preparer — preferably the one who will actually complete and stand behind your tax return for the year — before proceeding.
November 14th, 2012 | Uncategorized
Q. I am a federal employee with the Department of Justice, non-law enforcement, and will have 30 years of service at age 54, approximately two years before my minimum retirement age. Can I leave the government before MRA with 30 years and still be eligible to receive my special retirement supplement and my FERS retirement without a penalty at my MRA? Would I still be able to collect my Thrift Savings Plan, without penalty at my MRA, or would I be required to wait until age 59½?
A. Mike: If you separate from service before the calendar year in which you reach age 55, the early withdrawal penalty rules will apply to your TSP account. You may avoid the penalty by taking a series of Substantially Equal Periodic Payments, however.
Reg: If you left government before reaching your minimum retirement age, you could apply for a deferred retirement. Because you have at least 20 years of service, you could apply for that benefit at age 60. However, as a deferred retiree, you wouldn’t be eligible for the special retirement supplement.
October 22nd, 2012 | Uncategorized
Q. When I retire under FERS, can I get all of my Thrift Savings Plan monies, Social Security and my annuity? Can I roll over my TSP monies without paying 30 percent of the total to the Internal Revenue Service? If so, what amount of tax-deferred monies, once rolled over, can I take out monthly without a penalty or have to pay taxes?
A. Mike: Once you retire, you may withdraw your TSP money. If you retire during or after the calendar year in which you reach age 55, your TSP withdrawals will be exempt from the early withdrawal penalty. There is no withholding or tax due for TSP money rolled over to an IRA. If you are under age 59½, you will be subject to the early withdrawal penalty for withdrawals from an IRA. There are exemptions from the penalty, however, and they are spelled out in IRS Publication 590.
Reg: Yes, you can receive an annuity and, unless you retire under the MRA+10 provision, the special retirement supplement, when you reach your minimum retirement age. Unless you exceed the Social Security earnings limit from wages or self-employment, the SRS will continue until age 62 when you will be eligible for a Social Security benefit.
October 22nd, 2012 | Uncategorized
Q. I know that the Social Security supplement is reduced for any earnings above $14,640 (in fiscal year 2012). If I retire under FERS at my minimum retirement age but my wife keeps working at her job, will her earnings count toward that $14,640? Also, would distributions from my Thrift Savings Plan count toward it?
A. Mike: Your TSP distributions do not count as earned income.
Reg: The Social Security earnings limit applies only to your own earnings from wages and self-employment, not anything else.