By Mike Miles
October 8th, 2014 | TSP withdrawal
Q. I recently lost a high-paying private sector job. I may be getting a much lower-paying federal job. The only way I can make it is to cash out of my 401(k) about $35,000 to pay off debts. But I was thinking if I get the federal job, how long before I can participate in the TSP? And how long before I could take out a loan? Read the rest of this entry »
Tags: TSP withdrawals
March 19th, 2012 | Uncategorized
Q. I am planning on retiring within a year, at the age of 55. When will I be able to withdraw funds from the TPS account without a tax penalty. My understanding is at any age once retired but I would like to make sure I am correct on this.
A. As long as you retire from federal service during or after the calendar year in which you reach age 55, your subsequent TSP withdrawals will not be subject to the early withdrawal penalty.
December 19th, 2011 | Uncategorized
Q: I retire Dec. 31. How soon do I have to wait to take a partial withdrawal from my TSP account?
A: If you’re age 59 1/2 or older and haven’t done so in the past, you may request an age-based, in-service withdrawal immediately. You may also request a load immediately. Otherwise, you’ll have to wait until you are separated from federal service to take a withdrawal.
December 19th, 2011 | Uncategorized
Q: I’m covered by FERS and my agency is offering an early out. I’m at my MRA of 56 with just under 25 years of service. If I separate from service, can I access my TSP, either in the form of a lump sum, monthly payment or a combination of these? And can I do so without the penalty usually levied if a person is under 59 1/2 years old?
A: Since you are retiring from federal service during or after the calendar year in which you reached age 55, you will have access to your TSP account without suffering the early withdrawal penalty.
Tags: TSP withdrawals
December 8th, 2011 | Uncategorized
Q: A few years ago, I applied for an early withdrawal from my SP, specifically a hardship loan. Ten percent was taken right off the top, and I reported the early withdrawal on that year’s taxes. Two years later, the IRS says I owe them another 10 percent, plus a $1,000 penalty plus interest. If I had that kind of money, I wouldn’t have asked for a hardship. Does it even matter that I borrowed against my TSP for hardship reasons? Is there another way to borrow against your TSP (early) without going broke?
A: You took a hardship withdrawal, not a loan. Unless you meet one of the exceptions listed on Page 4 of the notice at https://www.tsp.gov/PDF/formspubs/octax92-32.pdf, which do not include general financial hardship, you’ll owe the penalty. Whether the IRS demand is incorrect or disputable, I can’t say, but you could have elected to take a loan, rather than a withdrawal, to avoid the penalty. Of course, you would have had to repay the loan to avoid a subsequent distribution.
November 28th, 2011 | Uncategorized
Q. If I withdraw $20,000 from my TSP account at retirement, are taxes taken from the amount or do I just have to claim it as income that year?
A. Twenty percent withholding is mandatory and you must claim the withdrawal as income on your tax return for that year.
August 29th, 2011 | Uncategorized
Q. I am trying to decide whether to withdraw from my TSP account or take out a loan to purchase rental property. I am no longer employed with the federal government and I am 55 years old. What would your advice be?
A. I won’t give you advice since I’m not familiar with your circumstances, goals and preferences. Also, you should avoid taking advice from someone who’s not responsible for the outcome it produces. I will give you some things to consider in deciding what to do, though. If you separated from federal service before the calendar year in which you reached age 55, you’ll have to contend with the early withdrawal penalty. You should also carefully consider whether, or not, the rental property will better support your retirement income needs that than your TSP investment. If the cash flow from the real estate investment will cover the payments for a loan, I’d tend to favor that option. If it won’t, you may want to reconsider the idea, altogether.
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.
April 13th, 2011 | Uncategorized
Q: If I retire May 1 at age 55 under the Civil Service Retirement System with 34 years of service, can I leave my $60,000 in the Thrift Savings Plan for a year or two and then, after seeing how life as a retiree goes, start up periodic payments? Or do I have to decide what to do with my TSP account right away?
A: You can delay the decision for as long as you like. You won’t have to start taking withdrawals until you reach age 70 1/2.
December 27th, 2010 | Uncategorized
Q: I retired Nov. 30 from the Foreign Service at age 60 and have a substantial sum in my Thrift Savings Plan. I would like to make a partial withdrawal in the near future to give me cash to renovate my house. In the future, when I decide to make a complete withdrawal, it looks like I could do a combination of a second lump-sum payout and a series of monthly payments. Am I reading the rules wrong? Can I indeed make this second lump-sum withdrawal?
A: Not unless the lump-sum withdrawal is the terminal withdrawal at the end of the the series of monthly payments. You could initiate monthly payments and then decide to end them later, culminating in a final lump-sum withdrawal. Otherwise, you can’t take a second partial withdrawal.