By Mike Miles
December 20th, 2010 | Uncategorized
Q: I have recently left federal service on a deferred retirement. I have about 27 years of service and am 50 years old (49 when I left service). If I withdrawal part of my Thrift Savings Plan account, is there a penalty, or do I simply have to pay income tax on the withdrawn amount? I have some very unexpected bills with the death of my son and do not want to pay monthly payments for a loan. I plan to withdraw about $50,000.
A: It sounds like you’ll be subject to the penalty unless you can meet one of the allowed exceptions, which include taking a series of “substantially equal periodic payments” as described in IRS code section 72(t). You can find more information in the tax notice here or by consulting a qualified tax adviser.
June 9th, 2010 | Uncategorized
Q: I worked for the federal government for about 12 years. When I left, I used some of my Thrift Savings Plan money as a down payment on my current home. That turned out to be a good move, since I bought when the market was down and my home’s value has gone up. However, with the recent downturn in the market, my parents have lost a tremendous amount of money and are in financial need. I would like to give them the remaining money in my TSP account (about $10,000). Is there any way to roll over my TSP funds to my parents without taking a large financial hit? As I understand it, if I withdraw my funds to give to them, I would lose about half the money to penalties and taxes.
A: I’m not aware of any exception to the taxes and penalties that will apply based on the things you’ve mentioned. You should consult a tax adviser to be sure, however.
April 28th, 2010 | Uncategorized
Q: Can I transfer funds outside federal Thrift Savings Plan system? I would like to invest in some stocks in private sector. I am still working under the old federal retirement system; I will be 63 in June and have 35 years of service. Are there any penalties?
A: You may take one age-based in-service withdrawal and roll it over to any Individual Retirement Account, without penalty. Use Form TSP-75, which, along with detailed instructions, is available at www.tsp.gov.