Q: I will retire at 48 with 25 years in law enforcement. I will also want to start receiving monthly checks from my TSP. I know I will have to pay the 10-percent penalty because of my age. Is this a one-time penalty or do I have to pay this every year until I reach age 56? A: You’ll be subject to the early withdrawal penalty until you reach age 59 1/2 unless you qualify for one of the exceptions listed on Page 4 of the notice at https://www.tsp.gov/PDF/formspubs/octax92-32.pdf.
Yearly Archives: 2012
Q: I plan to take the required minimum distribution from my Thrift Savings Plan each year starting the year after I turn 70 1/2. What forms do I submit and to whom? A: You submit Form TSP-70 according to the instructions on the form.
Q: I’m currently contributing to the 2050L fund of the Thrift Savings Plan. Is it possible to transfer my TSP funds to a Roth individual retirement account without getting penalized? I don’t want to touch the money, I just want to invest in precious metals instead of Fortune 500 companies and small businesses. A: If you are age 59 1/2 or older, you may take one age-based in-service withdrawal from your TSP account. Check with a CPA (ideally, the one who will be preparing your tax return for the year) for advice on converting it to a Roth IRA.
Q: Both my wife and I contributed to a Thrift Savings Plan and an individual retirement account for the 2011 tax year. We filed jointly. My wife maxed out her TSP contributions, but I did not because I was hired midyear. We both maxed out our IRA contributions at $6,000: her to a Roth, me to a traditional. When using an electronic filing program, the software would not include our IRA, but it did so when I ran a fictitious sample filed as a single. Why did the program not deduct the IRA? Is a simultaneous deduction for TSP and…
Q: As I understand the Voluntary Contribution Plan, eligible employees can start making deposits at any time prior to retirement. At retirement, they can choose to withdraw the funds or purchase a VCP annuity. Am I correct that after age 59 1/2, I can make a taxable withdrawal from my Thrift Savings Plan and deposit that money into the VCP to be used to purchase a VCP annuity upon retirement? A: Yes. The VCP doesn’t care where you get the money to make the deposit, as long as it is after-tax money.
Q: I’m a Federal Employees Retirement System employee and will retire at age 64. I will opt for monthly payments from my Thrift Savings Plan. I know I can change the amount yearly, but can I also change the plan in which the funds are invested? A: You may change your investment allocation in the TSP as you see fit, within the usual limits, for as long as you maintain the account.
Q: When I retire at age 56, can I take monthly payments until age 60 and then convert part of my Thrift Savings Plan balance to an annuity? Interest rates are at all-time lows, but in four years, with a potential rate increase and me reaching age 60, my monthly annuity payment would be higher than what I could get now. A: Once you begin monthly payments, your only options are to change the payment amount once each year or request the distribution of your remaining account balance. Purchasing a TSP annuity is not an option at that point. You…
Q: I understand that when an federal employee, through a rollover, transfers funds from an individual retirement account to the Thrift Savings Plan that the money transferred can only be pre-tax. My wife has both pre-tax and post-tax contributions in the same IRA. The IRA has grown for 20-plus years, so a lot of its value has had no tax has paid on it. Most of what I have read on the issue seems to indicate that because the IRA has some after-tax money in it, none of the money can be transferred into the TSP even though the amount…
Judging by the enthusiasm I’ve seen, some Thrift Savings Plan participants clearly believe that the new Roth option will be the solution to any and all retirement income problems. The option is set for launch as early as April, with whatever benefits it might produce. TSP has promised additional details as the availability date draws closer. Right now, you can get a peek under the hood on the TSP website. The Roth TSP option will allow you make deferrals of after-tax dollars from your paycheck into the plan. If you meet the requirements, which include being at least age 59½…
Q: I am going to retire when I am 62 in roughly 2 1/2 years. I will receive my FERS retirement, a small retirement from North Carolina that is similar to FERS and my TSP annuity. Will any of these “retirement” payments affect my Social Security benefit that I also plan on applying for at 62? A: Income derived from your TSP will not affect your Social Security benefit.