Q: I am currently in a Civil Service Retirement System 6C designated law enforcement officer position. Aside from my CSRS retirement benefits, of which I will reach the maximum annuity of 80 percent at the end of this year, I have also contributed to the Thrift Savings Plan. I am not planning on relying on my TSP funds to supplement my retirement. I know there are ways to avoid the 10 percent tax penalty for early withdrawals before turning 55 years old (taking the money in a monthly annuity, etc.). I would like to take all of my TSP out…
Monthly Archives: April, 2010
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.
Q: Your response to an earlier question on Voluntary Early Retirement Authority/Voluntary Separation Incentive Payments puzzles me. If a federal employee is eligible for a retirement annuity under the Federal Employees Retirement System despite the fact they are taking an VERA/VSIP, why would there be a penalty for “early” withdrawal of TSP? A: I think that I clearly stated a fact (“There is nothing in your question that will exempt you from the early withdrawal penalty.”) that answers your question.
Q: I like to make plans for my savings and would like to know whether the contribution limits will be increasing for the Thrift Savings Plan and the TSP Catch-up contribution plan for 2011 and 2012. A: The limits are indexed to inflation, and we won’t know whether they’ll be increasing until the inflation figures are in.
Q: I plan to take the Voluntary Early Retirement Authority/Voluntary Separation Incentive Payments at my organization. Because I will be 50 years old when I retire, I am entitled to the entire balance in my Thrift Savings Plan account; since I am retiring, does the penalty still apply? A: There is nothing in your question that will exempt you from the early withdrawal penalty.
Q: I have accumulated nontaxable (according to the Office of Personnel Management) retirement deductions that will be refunded to me shortly. I would like to roll this entire refund into a Roth Individual Retirement Account, but the “rollover information” letter they sent me is unclear. It states that I am permitted to roll over certain benefits into an IRA, but there is no mention of a Roth IRA. It also says that I can roll over the nontaxable amount into an IRA, but that I need to track the taxable and nontaxable ammounts. Because the entire amount is nontaxable, can…
Q: I am close to retirement in the Civil Service Retirement System and will transfer my Thrift Savings Plan investments from the C and S Funds to the G Fund to be safe. My question is in the transfer of funds: Is it the amount of shares that is transferred from one fund to another, or is the value of the fund used to purchase shares in another fund? For example: the S Fund with 2,000 shares at $19 a share is worth $38,000. The G Fund is worth $13.50 a share. Will the 2,000 shares transferred to the G…
Q: I plan on taking a deferred retirement at age 54 with 32 years of federal service in May 2012. I have been in the Federal Employees Health Benefits program since 1985. My wife plans taking a job in the federal government prior to me taking the deferred retirement. When she is hired, the plan is for me to transfer to her FEHB. When I reach age 56 in May 2014, how will the deferred retirement impact the three parts of the Federal Employees Retirement System (basic retirement with high-3, etc.; supplement, which should be 32/40 x what I receive…
Q: I am a 44-year-old Federal Employees Retirement System employee. I have a financial planner who wants to explore withdrawing part of my Thrift Savings Plan and rolling it into a Roth individual retirement account to take advantage of the two-year payout of taxes. I told the financial planner we only have two options for TSP withdrawals: One is for hardship, and the other applies if you are more than 59 1/2 years old. Because I do not meet either requirement, it appears to me that I cannot make an in-service withdrawal. Are there other options for in-service withdrawals? The…
Q: During the Obama campaign, there was talk of allowing up to $10,000 penalty-free 401(k)/Thrift Savings Plan withdrawals for hardship purposes. Have you heard whether this has been passed into law yet? A: It is my understanding that penalty-free hardship withdrawals are permitted under certain circumstances. You should start with IRS Publication 590 or consult a qualified tax adviser for details. I recommend using someone who would be responsible for preparing your return for the year of the withdrawal.