Q. How is the federal matching amount handled for the Roth TSP option? Under the traditional TSP, that amount is added to the deferred compensation and taxed when distributed. Is the matching put into the Roth? When is it taxed? A. Matching is based on amounts you contribute to either the traditional or Roth TSP accounts, but agency contributions are directed entirely to your traditional TSP account.
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Q. I have separated from federal service with an existing Thrift Savings Plan loan. My intent is to take a lump-sum withdrawal and take a taxable distribution versus paying off the loan. In the end, will I end up paying more or less tax if I were to pay off the loan versus taxable distribution? A. It’s impossible to say what you’ll pay “in the end,” but if you repay the loan on time, your tax on the money owed will be zero until it is ultimately withdrawn.
Q. I am 52 (FERS employee with 29 years of service including military buyback) planning on retiring at age 59-60. I have $400,000 in my Thrift Savings Plan account. I’m not sure that I’ll need TSP right away but want to have the option. My coworkers insist I can’t withdraw before 65, but I can’t find anything that indicates such a restriction. Are there any restrictions other than the 59½ rule that would affect me? A. No.
Q. I am retired at age 63 from the Postal Service. Can I roll over my Thrift Savings Plan funds to a simple IRA without any penalties before I reach 70½? A. Only simple IRA money can be rolled into a simple IRA.
Q. When I retire in two years at age 62, I would like to take a fixed monthly payment out of my Thrift Savings Plan. Can I still leave the balance in the L Fund and earn the rate that the L Fund is earning? A. Yes.
Q. Are the distributions from my tax-deferred TSP account (not Roth TSP) taxed as ordinary income or capital gains when I start drawing the money out? A. Ordinary income.
Q. I’m planning to retire Jan. 2 and would like your suggestions as to what to do with the $165,000 in my Thrift Savings Plan account. I thought about transferring the money from the TSP, buying an IRA and letting it remain there for a couple of years since do not think I will need the money at the present time. I am 63 years old and covered under CSRS. Any suggestions as to what to do with the money and the best company or companies to purchase an IRA would be greatly appreciated. A. The TSP is the best…
Q. I will be retiring in January. I have approximately $180,000 the G Fund. Should I consider the one-time withdrawal to a money market account that is FDIC-insured so I can have some liquidity in my cash flow? Could you recommend such a fund? Could you recommend any restructuring of my Thrift Savings Plan to accommodate current federal reductions in the stimulus program? A. Yes, should consider taking a withdrawal from your TSP account to provide needed liquidity, but only if no other resources are available to do the job. The best place for liquid cash reserves in this economy…
Q. I’m a 32-year FERS employee, 60 years old and about to retire in February 2014. I would like to take out some funds from my Thrift Savings Plan. Should I request an age-based, in-service withdrawal or take a partial withdrawal after I retire? A. Either will count as your single lifetime partial withdrawal. Will the tax cost for the withdrawal be significantly lower if the money is withdrawn in 2013? If so, you should consider taking the withdrawal now. If not, it will not really matter when you take it in 2014. If you need the money now but…
Q. I am a CSRS employee. I have decided to take the Voluntary Separation Incentive Payment and should be off the rolls by March 31. I am told that I can put in 10 percent of my basic total federal wages (could be in excess of $200,000) into the Voluntary Contribution Program and I should withdraw all of it when I retire. I am also told that I can deposit this withdrawn VCP money into a Roth IRA, which is the main reason I want to do this. Are my assumptions true? If it is, how can I open a…