Q. Regarding the Thrift Savings Plan and what can be deposited into my active TSP account: I was previously employed in a nonfederal job for which I had a 401(k) plan in which I was fully vested. After leaving the company’s employ, I rolled the 401(k) into an IRA. Now, I am thinking about taking the IRA and depositing it into my TSP. Is this allowed? Is there a maximum amount that can be rolled into the TSP? Where should I look to get the appropriate forms? A. You may transfer an unlimited amount of pretax money from a 401(k) or IRA…
Yearly Archives: 2012
Q. I am 60½ years old, under FERS and plan to continue to work until 66. I took out a loan from the Thrift Savings Plan and currently have payments for two more years. I am wondering if I could not pay this loan off and have it counted as a disbursement since I am old enough to withdraw from my account. I would not do this until 2013. A. Yes, if you default on your loan repayment, the TSP will declare your unpaid balance, including interest, a taxable distribution and the usual rules will apply.
Q. Current age: 56 Entered U.S. Navy active duty: May 1978 Active-duty military time: 11 years, four months Retired reservist after 26 years as an O-5 Entered civil service: November 1997 Current paygrade: GS-9, Step 8 Received a $30,000 severance pay when released from active duty in January 1989 Points accumulated, active and reserve, for retirement: 5,245 What do I need to do to retire at the end of this year? I know you can’t tell me what I should do, but if you could give me guidance as to what I need to do so I can make an…
Q. I am a FERS employee with the Postal Service and will have 30 years of service at age 57. Can I withdraw from my Thrift Savings Plan without penalty if I have reached my minimum retirement age? A. Your MRA has no effect on TSP withdrawal penalties. After you retire, you’ll have access to your TSP account without penalty. While you’re still working, you’ll have to wait until you reach age 59½ to avoid the penalty.
Q. I made the costly mistake of rolling over my Thrift Savings Plan into a traditional IRA. I had to file a Form 72(t) to take out payments until I reached age 59½. Then I moved to another firm, filed a new 72(t), and now I violated the original 72(t), and take a 10 percent retroactive penalty. A. I’ve written many times about the reasons not to roll your TSP account over to an IRA. This illustrates one of them — that you may be giving up penalty-free access to your funds. I’ve also written many times about the pitfalls…
Q. I will turn 70½ years old on March 29, 2014. In what year do I have to take my first required minimum distribution? I have been told it would be on April 1, 2015, but I want to be 100 percent sure it isn’t April 1, 2014. A. It’s the year after the year in which you reach age 70½, so 2015.
Q. I just discovered that my contributions to the Thrift Savings Plan don’t show up there until seven to 10 days after I’m paid, but that money doesn’t sit in my bank account all that time. Do you have any idea where that money goes for that time? Is the TSP earning interest on it? If so, does that interest get deposited in our accounts, or does the TSP get to keep it and put it toward administrative costs? At the speed money can move these days, I find it hard to believe it takes seven to 10 days to get…
Q. I am planning to retire next year. If Congress extends the Roth rollover provision, I am interested in pursuing the following scenario: I have funds in the Thrift Savings Plan that will be fully taxable upon withdrawal. If I withdraw them upon retirement (at 56), I will be taxed on them but not subject to the 10 percent penalty. I propose to take those funds and immediately (within the same day if possible) transfer them to the CSRS Voluntary Contribution Program account, which then could also allow a rollover into a Roth account. Therefore, am I permitted to fund the…
Q. In IRS Publication 575 on page 33, they list an exception from the 10 percent penalty on withdrawing from the Thrift Savings Plan fund for qualified public safety employees. As a federal agent, if I retire in the year in which I turn 50, am I exempt from the 10 percent early withdrawal penalty based on the qualified public safety employee clause? IRS Publication 721, pages 17-18 lists a law enforcement officer as a qualified public safety employee. If this is the case, why do they not mention this when doing pre-retirement seminars? A. The exception only applies to defined benefit…
Q. I’m a FERS retiree, age 64, with a $36,000 annual pension. My spouse has a $40,000 annual salary. We have a rental property that brings us $24,000 a year. And we have a home mortgage balance of $500,000. Our living expenses so far do not require me to withdraw my $600,000 Thrift Savings Plan fund. I plan to live until age 85. As I approach age 70½ with minimum distribution, what is the best tax strategy for transferring the $600,000 from the TSP into a private investment account? A lump-sum rollover into a Roth account after paying the taxes? A calculated…