Monthly Archives: December, 2010

TSP-penalty basics

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Q: I am a federal firefighter under the Civil Service Retirement System who will be eligible to retire next year with 28 years of service at age 50. When can I start withdrawing funds from my Thrift Savings Plan without getting penalized? A: If you receive a TSP distribution before you reach age 59 1/2, in addition to the regular income tax, you may have to pay an early withdrawal penalty tax equal to 10 percent of any portion of the distribution not transferred or rolled over. The additional 10 percent tax generally does not apply to payments that are:…

TSP payouts after disability retirement

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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…

Social Security and TSP benefit qualification

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Q: I will begin my first federal job soon. I turned 60 about one month ago. Must I work until age 65 to be eligible to receive Social Security or Thrift Savings Plan payments? I will have approximately four years and nine months of creditable service. A: Not necessarily. Your eligibility for drawing Social Security benefits based on your own record will depend upon your age and your history of contributing to the program, among other factors. You should visit www.ssa.gov for details. The rules for contributing to and withdrawing from the TSP are available at www.tsp.gov. In neither case…

Bond yields and the G Fund

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Q: As the government treasury bond yields go up, does the Thrift Savings Plan’s G Fund share price increase? The opposite would be true of the F Fund, since share prices would be affected in a negative way with rising interests rates. A: While there are times when the daily return for the G Fund is negative, the monthly and annual change in the G Fund’s share price is always positive.

TSP and turning 70

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Q: I’m turning 70 in February, I contribute the maximum to my Thrift Savings Plan, and I plan to work for a few more years. Am I allowed to continue contributing to my TSP in 2011, or will I be penalized with my taxes because I will be turning 70 1/2 in August? Also, will I be matched for my contributions?  A: Your eligibility to continue participating in the TSP, including any matching, will continue until you separate from federal service.

TSP withdrawal rules

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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…

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