Q: I turned 59 in October 2010. Can I take out of my 401(k) in January 2011 without a penalty? A: Yes, if you retired during or after the year in which you reached age 55.
Author Mike Miles
Mike Miles
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.
Q: I’ve been a federal firefighter for over 10 years. Our retirement is forced at age 57. According to my last TSP balance, I have just over $60,000. Not much considering 10 years worth of contributing. Doing the math and adjusting for economy, in another 10 years, I will have less than $120,000 for 20 years of service for retirement. How do I know I’m putting my funds in the right retirement fund? Right now, I have 100 percent going into the L2030 with 100 percent of future allocations going in the same. I just know I’m missing out on…
Q: I worked 20 years for the postal service, from 1984 to 2004. I was 49 when I resigned. My Thrift Savings Plan money has remained untouched. I am 56 now, my MRA. Will I be subject to the 10 percent penalty tax, if I ask for monthly payments for a period of 10 years to start now? If yes, how can I receive my TSP money now without the penalty tax? A: You’ll only avoid the penalty if your payments meet the IRS definition of Substantially Equal Periodic Payments. The rules for these payments can be complex and you…
Q: If I am offered early retirement with incentive pay, can I have the money used to pay off a TSP loan, with the remainder sent to me? A: Probably not, but you can accept the money and then use it to repay your loan.
Q: I am 51 and will retire from federal law enforcement after 24 years of service. Will I have to pay the 10 percent penalty for early withdrawal? I was always told the federal hazardous duty act exempted me from the provision. A: It is my understanding that the exemption applies only to withdrawals from a defined benefit pension plan, and not to withdrawals from defined contribution plans like the TSP. Check with a CPA to be sure before you proceed.
Q: I am a retired Army reservist since July 2011. I was called to active duty in support of OEF in August 2006 until May 2011. Before my active-duty orders ended, I took out a loan from my TSP account. The loan has not been repaid, and I have separated from the service. If I elect not to repay the loan, will I be subject to the 10 percent early withdrawal penalty or am I eligible for relief from the penalty since I was a reservist called to duty for more than 179 days after Sep. 11, 2001? A: There…
Q: If I can withdraw from my TSP if I retire in the year I turn 55 (CSRS) without the penalty, can I also roll over my TSP to a Roth IRA without the penalty? From what I have read, any rollover prior to 59 1/2 would trigger a penalty. Is there any special provision that allows the rollover at 55, like the early withdrawal for federal employees? Because I may be in a higher tax bracket later in my career, I would like to move it now, but not at the expense of the 10 percent penalty. A: If…
Q: I recently paid my loan off but I overpaid it. Will TSP send the remaining balance back to me, or will they put it into my TSP account? A: Since you are not permitted to simply deposit money to your TSP account, the amount should be refunded to you. You should contact the TSP to advise them of the situation and make sure they refund the overpayment.
Q. I will be 66½ when I retire with 15 years of federal service. How long can I leave my money in TSP until I am forced to take it out? Will I have to pay taxes on it when I am forced to withdraw, and is there a penalty accessed? A. You must begin taking withdrawals – called Required Minimum Withdrawals – by April 1 of the year following the calendar year in which you reach age 71½. Visit www.tsp.gov for more information.
Q. When I hope to retire in FERS, I will be 62 years old with 28 years creditable service. I will receive TSP payouts, Social Security benefits and a FERS pension. My wife will benefit from Survivors’ Benefits. I’m concerned about what the living costs will be as a retiree. Will I have to pay federal income taxes on all of the above income that I receive. I am told that the tax rate is cheaper after retirement. Is that just because there is less income, or is it also because we are in a lower tax bracket? A. All…