Q. I’ll be retiring this year, and using a portion of my TSP account balance to purchase a retirement home. My question is: For example, If I take an Age-Based In-Service Withdrawal of $100,000, and the TSP withholds 20 percent for taxes ($20,000) and I request an additional withholding of $10,000 to cover any tax shortfalls, will the declared taxable distribution be $100,000 or $130,000? A. The withholding is taken from the withdrawal, so the declared taxable distribution will be $100,000, you’ll receive $70,000 of it, and $30,000 will be deposited and held against your tax liability for the year.
Yearly Archives: 2014
Q. I am a retired federal law enforcement agent. I retired under the civil service plan but I invested in the FERS system. I am now 70 1/2 years of age, I have a balance of $72,000 in the TSP account and plan to withdraw $500 in monthly payments. If I die, will my wife, who is my beneficiary, continue to receive those monthly payments? A. Those payments will stop at your death, but your wife may take over the account and resume the distributions.
Q. Does the TSP offer any way to keep money in TSP for beneficiaries to continue growth? I just read about a stretch IRA that allows beneficiaries to keep money in the account when you die. The only stipulation is they have to take the RMD right away and it is taxable. A. Your spouse beneficiary may inherit your TSP account and treat it as their own. Your non-spouse beneficiary may retain the proceeds in an Beneficiary IRA account, subject to the RMD rules for that type of account.
Who should you trust to manage your life savings? Your employer has put the job of managing your Thrift Savings Plan account, which might be the bulk of your life savings by the time you retire, squarely on your shoulders. Unfortunately, many participants invest their trust in the wrong sources and wind up suffering the consequences. The fact is that a trusted source is not the same as a trustworthy one, and knowing the difference is critical to your financial well-being. Before you place your trust in any investment or other financial advice, you should evaluate the source of that…
Q. My concern was that I took all my money out of the TSP when I left the government in 1989 and then came back years later, in 2004. Does that affect my date of eligibility (SCD for retirement)? Related question: Will I be considered to have worked at this point (as of March 2014) 25 months (old service) plus now about 10 years, so about 12 years total, or only 10 years (my current service beginning in 2004)? Also, when my FERS annuity is figured, is that on 10 years or 12 years? Finally, am I currently eligible to…
Q. If a Thrift Savings Plan in-service withdrawal is used to purchase rental (investment) property, are federal taxes on the TSP in-service withdrawal deferred until the rental property is sold? A. No. The withdrawal will be considered ordinary income in the year it is distributed.
Q. I have funds in my TSP account, turn 70 ½ in 2015, and have recently been furloughed from federal service but have not resigned or been separated. I am eligible to return in 2015. I understand that if I return to federal service in 2015 without separating, I can resume TSP contributions and do not need to take RMD until I separate. However, I understand that if I am separated from federal service in 2015 and do not choose either an annuity or a monthly distribution plan, I must accept full distribution. In that case, can I call the…
Q. I have two years of temporary services. What are the pros and cons of buying back the temp time? I am approaching my 27th year of federal service. I came in under FERS; at what age can I retire and get my TSP monies without being penalized? A. You may avoid the early withdrawal penalty on TSP distributions at any age if you meet one of the exemptions listed on page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf. One of these exemptions is for those who retire during or after the calendar year in which they reach age 55.
Q. I am eligible to buy 12 years of military service credit for my civil service retirement. I am curious if I can take a 401(k) from a previous job and roll it over into the FERS system without a tax penalty. Can you help me with this? A. You may not.
Q. I am a single 24-year-old in the Army Reserve. I am interested in contributing to one of the two TSPs and wanted to know which would be the better route? I also have a 401(k) at my civilian job and contribute 6 percent to their 4 percent they match. I plan on working until I am at least 65. I am aware it is a broad question, but any information would be helpful. A. It’s impossible to say which will work out better for you. It will likely matter far more that you save the money, than which account…