Q. I am retired military, drawing Social Security. I am planning on retiring from the federal government soon. If I take all of my Thrift Savings Plan, how much will be taken out? I owe $10,000 on a TSP loan and know I should pay it off. If I pay the loan before taking money and I roll into an IRA, will my money then be tied in the IRA and I can’t use it? Also, I heard you can combine military pay with federal retirement. How does that work?
A. Mike: If you withdraw your entire TSP balance after you retire, 20 percent will be withheld as a deposit against your federal income tax liability. If you request a direct rollover into an IRA, there will be no withholding. If you are retiring from TSP covered service between the ages of 54 and 59, inclusive, rolling your TSP money into an IRA may affect your ability to withdraw the money without penalty before you reach age 59½, so be careful if this is the case.
Reg: You can make a deposit to get credit for your active-duty service. That tie will be used to determining your total years of civilian service and in the computation of your annuity when you retire. However, because you are retired military, you’ll have to waive your military retired pay when you retire from your civilian job. If you don’t, your deposit will be returned to you and you won’t get any credit for that time.