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. 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…
Q. I retired after 26 years of active military service at the age of 52. I’m now 61 years old. I would like to withdraw all the funds in my TSP account for use in various home improvement projects. Am I subject to a 20 percent income tax and 10 percent early withdrawal penalties?