Q. I am separating from a covered law enforcement position after age 50, but before I attain retirement eligibility. I have an outstanding TSP loan that will become an early distribution. My understanding is that I will not be subject to the 10 percent penalty, but will pay income taxes on it. Can you confirm if this is correct? Also, I have a military TSP and will continue to contribute to it. Can I assume the loan repayment using those funds to avoid the distribution?
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Q. I am a federal employee who plans to retire with 30 years of service when I hit the 30-year mark in the year when I am 54 years old. Something that I have read that you talked about was that if I retire in the year when I am 55, then I can fully withdraw my TSP funds. I don’t become eligible to receive a retirement until I hit 56 years and two months. Will my early or deferred retirement allow or not allow me to take advantage of the “no tax penalty” rule that allows for full withdrawals when…
Q. After 20 years of marriage, my wife and I have decided to divorce. Both of us became civil servants after our marriage and have TSP accounts. The settlement that we agreed upon has me paying her roughly $100,000 from my TSP account to her TSP account. In researching how to achieve this, I have only found direction on what the court order contains and the process the TSP takes to execute the court order. The brochure explaining this also states: “The party who must pay Federal income tax on the distribution will receive tax reporting and withholding information from…
Q. I will be 70½ years old in October 2017. I was planning to take a full withdrawal of my TSP account so I can set up trust funds for my grandchildren. I was told this was a bad idea, due to taxes in Virginia. What do you think? A. The alternative is to leave your TSP in place, make the trusts the beneficiaries of the account and contribute the required minimum distributions to the trusts as they are taken. This will allow you (and your grandchildren) to reap the unique benefits of the TSP for as long as you…
Q. I understand TSP does not withhold state taxes from periodic payments, but what I don’t understand is how those state (Ohio, specifically) taxes get paid. Does that mean I will have to pay estimated tax four times a year?
Q. I retired from the U.S. Postal Service in February 2015 at age 57, with 30 years and three months of service (3 years with the military). I did not withdraw any funds from my TSP account. My plans are to withdraw all funds in April 2017 when I reach 59½ years old to pay off debts and purchase income-producing real estate. Are there any tax ramifications and any penalties I would have to pay?
Q. I am 58 year old and have 30 years in FERS. I am planning to retire soon. If I withdraw money from TSP on a monthly basis, do I pay FICA or Medicare tax?
Q. If I take out $380,000 from my TPS upon retirement to pay off my mortgage, how much tax liability will I have? I will be 63½ years old, and have a total somewhere around $475,000 in my TPS account. Can I use these funds for a mortgage payoff?
Q. Recently, legislation known as the Defending Public Safety Employees’ Retirement Act was passed, which would amend the tax law to allow special category employees to withdraw money from TSP accounts prior to age 59½ without incurring the 10 percent IRS tax penalty. I am a military technician with 33 years of service. I know military technicians are special category employees. Would I qualify for this provision?
Q. Let’s suppose I have a TSP account balance of $300,000, and when I die I leave the $300,000 to my spouse in a beneficiary participant account (BPA). She then sets it up so the two children we have are beneficiaries in equal shares. When she passes, my understanding according to TSP rules is the children cannot transfer the money into an inherited IRA to minimize their tax consequences. The money will have to be paid out in equal shares to the children and be fully taxable. I was told that in this case the spouse should transfer the money out of…