By Mike Miles
Would furloughs mean relaxed TSP rules?
July 6th, 2011 | Uncategorized
Q: If Congress is slow to approve a raise in the debt ceiling and the government decides to furlough employees in order to pay other loans, what are my options to use Thrift Savings Plan funds to put food on the table? Can I only make early withdrawals that are subject to penalty and tax, or can I get a hardship loan with delayed repayment when my checks start again?
A: Unless an exception is offered, you should assume that you will still be considered “in-service” during the period and will be subject to the in-service withdrawal limitations. This means that you’ll have access through a loan, a hardship withdrawal, or an age-based in-service withdrawal, if qualified.
Tags: furloughs, thrift savings plan, TSP, TSP withdrawal penalties, TSP withdrawals
Withdrawal of TSP contributions
January 27th, 2011 | Uncategorized
Q: I am a CSRS employee and am going to retire in May 2012 from federal service/military service (Air National Guard) at age 55. When I retire, I want to withdraw all TSP contributions I made as a CSRS employee. I have 3 questions that I would like to get the answers to: Will I have to pay taxes on the amount (currently a little over $55,000)? Are there any penalties I will have to pay when I request a full withdrawal of these funds? What is the tax rate that I would be expected to pay if I have to pay taxes on the amount immediately following withdrawal?
A: Your withdrawals will be taxed as Ordinary Income. Since you are retiring during or after the year in which you reach age 55, there will be no early withdrawal penalties assessed. The taxes on the withdrawal aren’t due until you file your return for the year, but the TSP will withhold 20 percent from your distribution in deposit against your tax liability.
TSP payouts after disability retirement
December 30th, 2010 | Uncategorized
Q: I am 53 years old, and I was a U.S. Postal Service employee with 20 years of service under the Federal Employees Retirement System. I took disability retirement from the USPS in March after suffering injuries in Iraq as a reservist. If I take a full withdrawal from my Thrift Savings Plan account, will I pay a penalty to TSP, and at what percentage? How much will I have to pay in taxes? Will the USPS match my TSP balance? And how long must my money stay in a TSP account before I can make a full withdrawal without a penalty?
A: For the rules covering withdrawal taxes and withholding, see the TSP notice here. The TSP does not levy penalties against withdrawals; that’s a matter for the IRS. Whether you may withdraw your funds without penalty will depend upon the way in which you take the withdrawal and the extent of your disability.
While I’m not an expert on USPS-specific benefits, I don’t know why they would double, or otherwise increase, your TSP balance beyond what has already been contributed to your account. Because you are separated from service, your vested TSP balance is available to be withdrawn immediately.
Tags: disability retirement, penalties, Postal Service, taxes, thrift savings plan, TSP, TSP withdrawal, TSP withdrawal penalties, USPS