Monthly Archives: November, 2009

Taxes, penalties for cashing in TSP

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Q: I plan to retire at the end of December 2009, and am thinking about cashing in some or all of my Thrift Savings Plan in 2010. I am on the Federal Employees Retirement System and I turned 62 this year. How much will I be penalized by TSP? I know I will pay income taxes on it in 2010, but I am wondering if I’ll get penalized, as well. A: You’ll pay taxes, but no penalties.

Restrictions on TSP withdrawals

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Q: If I leave before I reach my Minimum Retirement Age, will I be able to start withdrawing from my Thrift Savings Plan when I reach my MRA without a penalty? A: Yes, but restrictions will apply if you separate from service before the calendar year in which you reach age 55. See the notice at http://www.tsp.gov/forms/octax92-32.pdf for more details.

Staying in TSP a smart idea

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Q: I am a 59-year-old Federal Employees Retirement System employee and have 35 years of service. I am considering retirement next year after reaching my 36th year. I would like to know my options concerning the Thrift Savings Plan. The questions I have deal with both leaving the funds in the TSP and moving them to another form of retirement account, which would not result in an immediate tax liability. Could you please explain the options available and what the benefits are to each? A: You may leave your money in the TSP or roll the balance over to any…

Rules for transferring mutual funds, Roth IRAs

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Q: I have mutual funds and Roth IRAs with an outside company. Could I roll everything into my Thrift Savings Plan account? A: You can transfer traditional IRA or Qualified Employer Retirement plan balances that contain no post-tax dollars (non-deductible contributions) into your TSP account. You may not transfer Roth IRA money or non-IRA mutual fund balances into the TSP.

TSP options after early retirement

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Q: I have recently taken Voluntary Early Retirement from the Postal Service as of Oct. 31, 2009. I want to withdraw money from my Thrift Savings Plan account under the 72(t) section, but am having difficulty filling out the TSP 70 form correctly. I want to do it right the first time so that my case is handled properly and I do not have to encounter any complications later on. Can you guide me on how to fill out this form correctly? I turn 55 on Dec. 2, I am married, and my TSP balance is approximately $400,000. A: The…

Financial planning for retirement

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Q: I read your column about getting expert advice on financial planning for retirement from someone who will not have a conflict of interest. I am planning on retiring from the Civil Service Retirement System in February after 40 years of service and suddenly realize I need some help. I will also be rehired as an annuitant and will have another income stream for at least another year. Can you provide help or at least a recommendation to whom to contact? A: You can contact me through my Web site at http://www.variplan.com or at mmiles@variplan.com.

Accessing TSP to pay off debt

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Q: Due to some less-than-intelligent decisions I made 10 years ago, I have a tax bill with the IRS for over $100,000. The only asset I have that would enable me to pay this bill is my Thrift Savings Plan. The IRS has put a levy on my wages and won’t discuss an offer in compromise because I have $280,000 in my TSP. I am 58 years old and didn’t plan on retiring until I turned 60. Can I liquidate my TSP, transfer the funds directly to a tax-deferred IRA and avoid the tax bite, but still liquidate enough funds…

Roth IRA rollovers

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Q: I am a 62-year-old federal employee who will retire in January 2010 under the Civil Service Retirement System. I have put after-tax money into the voluntary contributions (VC) program and plan upon retirement to roll the interest earned directly to my Thrift Savings Plan account and the after-tax contributions to a Roth IRA. I understand that the IRS says that the VC program is a Qualified Retirement Plan. Can the after-tax contributions can be rolled directly to a Roth IRA without paying taxes on the rollover? A: In general, it is possible to roll your VC balance into a…

Withdrawing from TSP account

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Q: I am an employee (Federal Employees Retirement System) at a BRAC-ed installation. Sometime around September 2011, I will be fired. At 56 years old — the age at which I’ll have 29 years’ service — I can retire. I would like to cash in my Thrift Savings Plan (approximately $156,000), collect on my rolled-over leave ($54,000), collect on 50 percent of my sick leave ($17,000), collect my $25,000 and pay off all my debt. I’ll live on my pension and offset. Can I take out all my TSP funds, and what is the tax bite if I should do…

TSP account strategy

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Q: Next year, I’ll retire with 12 years of federal service and I will be 67 years of age. Should I keep about 225,000 in the Thrift Savings Plan and start required withdrawals at 70½ or purchase an annuity? Do you see any other option, and what is a reasonable exposure to stocks in percentage (C, S and I) at my age, even after retirement? A: The question about whether to continue to manage your TSP account and take withdrawals for income, or use some or all of the money to buy an immediate annuity — through the TSP’s program…

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