Q. I retired December 2010, at age 53. I would like to withdraw my 401(k) but understand the penalties involved since I separated before age 55. Under “exceptions” in the tax code there is a “qualified public safety employee” exception to the rule. Do 6C government employees fall under this? A. To the best of my knowledge, the qualified public safety employee exception only applies to defined benefit pension plans, not defined contribution plans like the TSP or a 401(k). A bill to change this – HR 6157 – was introduced in 2008, but never made it out of committee.
Monthly Archives: November, 2011
Q. With talk of the Postal Service downsizing I was wondering: I am 48 years old, have 25 years at the Postal Service and four years active military. I realize at 25 years I can retire, regardless of age. But can I access any of my TSP without penalty or must I wait until my MRA of 56? How about the Special Retirement Supplement? Mike Miles: A. If you retire before the calendar year in which you’ll reach age 55, your TSP withdrawals will be subject to the early withdrawal penalty until you reach age 59 1/2, unless you can…
Q. In running various scenarios using the TSP website calculators for TSP payout options (life expectancy and/or specific dollar amount) I notice that all the monthly amounts paid will drop off sharply sometime soon after a person reaches 100-plus years of age. What if a centenarian is still in relatively good health by that time and still needs the income from the TSP? Also what about the effects of inflation after so many years? Does a person need to plan to reinvest some TSP payout into another type of investment in order to provide for very late old age? A. …
Q. I would like to know the best way of accessing all the money in my TSP account while avoiding IRS early distribution penalties. Here is my situation: * I am CSRS Offset and retiring on Jan. 31 with 30 years of service. * I will turn 55 on Sept. 1, 2012. * I have $92,000 with the TSP. I need to withdraw virtually all of my TSP account to pay off all my high-interest loans. How soon can I withdraw the TSP account funds without the IRS early distribution penalty? A. Since you are retiring during the calendar year…
Q. Why is the government taxing my retirement money when it’s already been taxed? A. Is it? Please provide a specific example. Your TSP distributions were not taxed before you contributed the money. Your CSRS or FERS annuity payments are partially tax-exempt, allowing the return of your contributions to be excluded from re-taxation during your lifetime.
Q. If I receive a Voluntary Early Retirement Authority at age 54, when and what options will I have to withdraw money from my TSP account? It is my understanding I have to be 55 before I can withdraw money without the penalty. I assume I would be able to start the date I turn 55 and if that is true, are the same withdrawal options available to me as if I retired after I turned 55? Also, if I take monthly payments, when can I change those? A. Once you separate from service, you may take a lump-sum withdrawal…
Q. I am aware that the G fund is not at risk to default, but is subject to the risk of inflation. Could you explain what type of loss would be experienced if we returned to the inflation rates of the 70’s? How would an inflation rate of 15 percent affect my funds in the G fund? A. Inflation should not produce a nominal loss in the value of the G fund. The G fund guarantees preservation of principal and pays a rate of return – interest – equal to the weighted average return for outstanding treasury debt. The risk…
Q. What are the options for rolling over our TSP funds? You also always state to keep our funds in TSP as long as possible. Are we guaranteed that our money will be there? If I take a monthly payment, will that monthly payment be minus taxes? A. You may roll over a distribution from your TSP account to an IRA or other qualified retirement plan, as long as the distribution to be rolled over is not a Required Minimum Distribution. Your funds are guaranteed to be there if they are invested in the G Fund. If you take full…
With federal benefits open season beginning Nov. 14, now is a good time to review the basic forms of insurance you should consider, and possibly use, as part of your financial plan. I’ve listed them in order of importance, for most people. As you consider your options, ask yourself where each dollar will best be spent. Protection always sounds great — until you consider its cost and what else that money might be doing. 1. Medical. The likelihood and potential size of medical expenses make them the No. 1 financial threat to most financial plans. If you can only afford…
Q: Are monthly payments taxed? Is there any way to get around paying so many taxes on your TSP withdrawals? A: Your TSP withdrawals, unless they are rolled over, are taxable as ordinary income.