10% tax penalty and VERA


Q. My wife retired under a Voluntary Early Retirement Authority in August 2011. Her 1099-R displays a “1” as the distribution code in Block 7 of the form, “no known exceptions.” For years 2011 and 2012, we paid a 10 percent tax penalty for early withdrawal from her Thrift Savings Plan. I know the tax is usually levied unless the person is 59½ years of age, but at what age will the code on the 1099-R change for my wife so we won’t have to pay this tax? Will she benefit at some point because her retirement was a VERA, and at what age can we escape this tax? Her date of birth is Nov. 27, 1959. She retired with 24+ years of service from Natural Resources Conservation Service.

A. I can’t tell you when the code will change, but since she separated from service before the calendar year in which she reached age 55, she will subject to the early withdrawal penalty until she reaches age 59½ unless she can meet one of the exceptions listed on Page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf. A VERA is not one of the exceptions.


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Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

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