Q. I just separated from the military and have an outstanding loan. I recently mailed in the “intent not to repay” form. How long will it take for the Thrift Savings Plan to claim a taxable distribution and close out the loan? Also, if the entire sum of the loan was accrued in a tax-free combat zone, will they still tax the remaining balance? A. I checked with the TSP, and it should take one to two weeks for TSP to declare a taxable distribution once it receives an “intent not to repay” notice. Only the outstanding loan principal and…
Yearly Archives: 2012
Q. I’m thinking of retiring at age 66 (I am FERS). How do I access my Thrift Savings Plan without any penalties or taxes? Is there a limit of withdrawal per month? A. Because of your age at retirement, your TSP withdrawals will not be subject to the early withdrawal penalty. They will be subject to income tax, however, unless you roll the withdrawal over to another tax-deferred account.
Q. When the Philadelphia Naval Shipyard closed in 1995, I withdrew all $29,000 of my CSRS money. I had 16 years of service time at the shipyard. After years of working in the private sector, I have now worked six years (two temporary, four permanent) for the government under FERS. I was told I would have to pay back $61,000 or I would owe $35 a month when I retired (to keep my health insurance.) I do not have $61,000. I have $31,000 in my Thrift Savings Plan account. I am 64 years old and my body is worn out…
Q. I have a loan of $6,000 on my Thrift Savings Plan with 20 payments left. I am 60. If I make an age-based in-service complete withdrawal of my TSP, what happens to my loan and the payments I am making? Do I have to keep making the payments and then wait until I separate from service to receive it, or will it become a taxable disbursement and end my payments? A. Your loan repayment obligation continues until the loan is repaid or you fail to make the required payments and the balance due is declared a taxable distribution.
Q. I am a FERS employee who has 12 years before I can retire. I have already invested $4,000 in a Roth IRA for 2012 and switched all of my Thrift Savings Plan contributions to the Roth option in May. My financial adviser said I could not invest more than a total of $5,000 in both Roth accounts for 2012 and told me to switch my contributions back to the traditional TSP. Is he correct, or can I invest the $4,000 in the Roth IRA and $17,000 in the Roth TSP? In other words, can I still invest the annual…
Q. I have a rollover IRA with Fidelity with approximately $75,000 at current market rates. I am wondering if it is better to transfer this money to my Thrift Savings Plan or leave it where it is? I have eight years until I retire at age 66. What do you recommend? A. Since the TSP offers expected investment performance superior to what you’ll find anywhere else, I recommend that you transfer as much of your portfolio as possible into the TSP and keep it there for as long as possible.
Q. I am 61½ years old. I want to pay my mortgage off. I am losing my contract job and need to lower my debt. I have saved up all but $30,000. If I withdraw that from my Thrift Savings Plan, how much in federal taxes will I have to pay? Would it be better to get a personal loan? A. Your TSP withdrawal will be added to your income for the year and taxed at your marginal tax rate for the year. You’ll need to prepare a pro-forma tax return to estimate the amount you’ll owe. It’s impossible to say,…
Q. I will be taking voluntary early retirement July 31. I have plans to take my money out of TSP to pay off bills and buy a home. Would it be better to wait until next year to pull out since I will be in a lower tax bracket? A. While it’s nice to reduce the tax liability on your withdrawals, the size of any advantage you’ll enjoy from waiting will depend on how much income is ultimately exposed to lower tax rates. Once the potential tax benefit from delaying the withdrawal is determined, it needs to be weighed against…
Q. I am 59 years old and will have 38 years civil service (FERS) in October. I hope to work until age 62. We went to a financial adviser when my husband retired two years ago, and he invested his 403 in an insurance fund and another fund recommended by this adviser. It has earned around 5 percent. The adviser now wants me to withdraw most of my Thrift Savings Plan at 59½ and invest with him. I know 5 percent is pretty good, but it will be locked in for several years. He also recommended I purchase whole life instead of…
Q. Can I roll over the balance of my Thrift Savings Plan loan to an IRA at retirement and keep making loan payments? I am trying to delay the impact of the entire balance being counted as income on my 2012 income tax (assuming I am retiring in August 2012). A. No. Loans are not permitted from an IRA.