By Mike Miles
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. I am looking at retiring in January 2015. I will be 56 years old Oct. 15. I will have 30 years in as of Dec. 24. Waiting until the end of leave year to cash in all available annual leave. I am looking at cashing out my Thrift Savings Plan in a lump sum to pay off all debts. Will that income be considered part of earned income so that the special retirement supplement is reduced?
If so, would it be in my interest to retire at the end of 2014 so that my annual leave hits that year instead of 2015? I will have more than 1,800 hours of sick leave accrued by the end of 2014. Can that be used to offset the age so that I could perhaps retire earlier so that the TSP lump sum is counted in 2014?
A. Mike: No, the TSP distribution will not be considered earned income. It is considered ordinary income.
Reg: Unused sick leave is only added after you have met the age and service requirements to retire. Therefore, to avoid the 5 percent-per-year age penalty imposed on those retiring under the MRA+10 provision, you’ll have to wait until you reach your MRA and have 30 years of actual service. Regardless of whether you retire at the end of 2014 or the beginning of 2015, you wouldn’t receive a lump-sum payment for your unused annual leave until 2015. It will be considered to earned income, so the annual Social Security earnings limit would apply. Depending on how much annual leave you’ll be cashing in, it could reduce or eliminate the special retirement supplement for 2015.
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 10th, 2014 | Uncategorized
Q. I am retiring the end of June with 30 years at my minimum retirement age (57). I will be collecting the special retirement supplement. Does any money I take out of my Thrift Savings Plan affect the SRS limit I can make that year?
A. The offset to the SRS is for earned income, not TSP withdrawals, so there will be no effect.
February 10th, 2014 | Uncategorized
Q. I am a federal air technician with the Air National Guard. I have 34 years in the Guard and 27 years as a federal full-time technician. I am in FERS and have a minimum retirement age of 56. I will be 53 this year.
It has been communicated to me that I will probably not be retained this year, meaning that Dec. 31, 2014, I will be involuntarily retired, thus losing my full (technician) and part-time (traditional Guard) employment. When can I begin collecting my retirement pay, Social Security, Thrift Savings Plan? Are there any penalties if I was forced to retire?
A. Mike: You may begin collecting your TSP money as soon as you retire.
Reg: Because you have enough years and civilian service (50 and 20), you’d be able to retire immediately and receive a discontinued service annuity. You would also be entitled to the special retirement supplement, which approximates the amount of Social Security benefit you earned while a FERS employee. The SRS would continue to be paid until you reach age 62 and are eligible for a Social Security benefit.
January 22nd, 2014 | Uncategorized
Q. I remember reading an article on ways to retire at eligibility of 56 years old and being able to draw my tsp before age 59½ without a penalty. Is there a way to do this? There is no disability involved in my retirement.
A. Yes. If you retire from federal employment at age 56, you will be exempt from the early withdrawal penalty.
January 20th, 2014 | Uncategorized
Q. I think I will be retiring Dec. 31, 2015 (under FERS) since my minimum retirement age is 56, and will reach it on Dec. 21, 2015. I will have 31½ years in federal civilian service. Can I start my Thrift Savings Plan monthly allotments right away (I have over $390,000 as a balance as of today) to supplement my 31 percent of salary from FERS retirement and special retirement supplement?
A. Yes, you will be able to begin withdrawing from your TSP account as soon as TSP receives notice from your agency.
January 6th, 2014 | Uncategorized
Q. I am 50 years old and plan to resign in within two years. I will more than 10 years of service, but my minimum retirement age is 56. Sometime after I turn 56, I plan to submit for a deferred retirement, even though I know I will take a penalty of 5 percent each year under age 62. The Thrift Savings Plan states that “if you are age 55 or older in the year you separate or retire, the 10 percent early withdrawal penalty tax does not apply.” Does this apply to deferred retirements, as well?
A. There is no such thing as “deferred retirement.” You’ll be separating from service and then claiming a deferred annuity. It’s the separation date that counts for the early withdrawal penalty.
December 10th, 2013 | Uncategorized
Q. I have an opportunity to retire under a Voluntary Early Retirement Authority. I have 30+ years of FERS service, non-law enforcement. My age will be 53 years and 11 months if I retire under this VERA offering.
At what age will I have full access to my Thrift Savings Plan without the 10 percent early withdrawal penalty by “taking substantially equal payments over my life expectancy.”
At what age will I have full access to my TSP without the 10 percent early withdrawal penalty by NOT “taking substantially equal payments over my life expectancy.”
If immediately upon retirement I begin collecting TSP funds “paid as substantially equal payments over my life expectancy”:
Do I avoid the 10 percent early withdrawal penalty?
Must I continue this withdrawal option for life, or only until I reach age 55?
Must I continue this withdrawal option for life, or only until I reach age 56, my minimum retirement age?
Must I continue this withdrawal option for life, or only until I reach age 59½?
A. If you retire prior to the calendar year in which you reach age 55, you will not have unrestricted access to your TSP account, without penalty, until you reach age 59½ unless you become totally disabled. This is true whether or not you initiate a Series of Substantially Equal Periodic Payments (SOSEPP) as defined in IRC section 72(t) if you retire prior to the calendar year in which you reach age 55.
If you properly initiate and maintain a SOSEPP, you will avoid the early withdrawal penalty on the SOSEPP withdrawals. The SOSEPP must continue for five years, or until you reach age 59½, whichever is longer. If you disrupt the SOSEPP or otherwise violate the rules for this, the early withdrawal penalty will be assessed on all withdrawals that were protected under the SOSEPP.
November 18th, 2013 | Uncategorized
Q. I am a FERS employee and will have 30 years of service at age 56, my minimum retirement age. Thus, when I retire at 56, can I start withdrawing from my Thrift Savings Plan without any tax penalty? Or do I have to wait until 59½ to start withdrawing from my TSP to avoid any tax penalty?
A. In the circumstance you describe, your TSP withdrawals will not be subject to the early withdrawal penalty.