Q. My boyfriend worked as a civilian marine electrician in the Navy and he has a 401(k) plan or a Thrift Savings Plan. He’s not working with them anymore, and he wants to withdraw some money to start a new life. He does have a job, but it’s not enough to pay his bills, and he wants to get a divorce from his wife but has no money to even file it. I’ve read several articles and I think his best option is to directly roll over the plan to a traditional IRA, which avoids any penalty fees, but he will still pay tax depending on how much he withdraws for a year. Any other best ways to touch the money? He just needs some, not all.
A. He can roll over the money to an IRA to remove it from the TSP and defer the tax bill, but he won’t be able to spend the money unless he withdraws it from the IRA, which will trigger taxes. He may want to consider a loan from the plan instead, which isn’t available from an IRA. This will avoid the taxes, but the loan will have to be repaid according to the schedule.
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His wife has to sign off on the withdrawal paperwork for the TSP account. What do you think the chances are that she’ll want a piece of that money?