Q. I am 56 years old with 38 years of service including military time which I bought. I am under FERS. I am seriously contemplating retiring any day now. Can I, at this age of 56, withdraw from my Thrift Savings Plan? What are the penalties, if any? What about the 20 percent that TSP automatically deducts? Also, what about the federal taxes? A. Under the circumstances you describe, your post-retirement TSP withdrawals will be exempt from the early withdrawal penalty. Your withdrawals will be subject to federal income taxes for the year of the withdrawal, and there may be withholding…
Q. I have an IRA that guarantees me a 4.50 percent interest rate. I can roll over IRAs anytime. Very little fees if any. It is a variable annuity that I purchased in 1983 that has granted me the fixed income. I am thinking of rolling over my Thrift Savings Plan and only taking the required minimum distribution at the end of each year. I can take out money without any penalty except for taxes. There is also a good death benefit. There are no surrender fees. What are your thoughts? I am already 75 years old. A. The phrases…
Q. Can active employees do an in-service transfer of any portion of their Thrift Savings Plan? A. Yes, if you qualify for a hardship or an age-based in-service withdrawal. Visit www.tsp.com for details.
Q. I am CSRS and will be retiring next year. I will be making a contribution (after-tax) to the Voluntary Contributions Program before retiring. I have an existing Roth IRA (after-tax), reflecting contributions I have made over the years. I do not have a traditional IRA (pretax). I do, however, have money in the Thrift Savings Plan (pretax). I plan on converting the VCP contributions (after-tax) to my Roth IRA (after-tax) at retirement. Any interest earned (pretax) in the VCP will be transferred to the TSP at retirement. After doing some research on this and reading IRS Pub 590, it…
Q. I am separated from federal service, and I want to roll my Thrift Savings Plan funds over into two or three separate IRAs at one or more brokerage houses. Am I allowed to make two or three partial withdrawals and roll each portion into separate IRAs? Are there time restrictions such as only being permitted to make one such transfer in a 12-month period? A. You are not allowed to take multiple partial withdrawals from your TSP account. You may roll the money over to an IRA and then roll over partial withdrawals from there to additional IRA accounts.
Q. I’ve worked for the Postal Service since 2001. There is $29,000 in my Thrift Savings Plan. I was on the 3 fund for all of those years. I would like to make some changes hoping to bring in more. I am 37 years old. I just changed it to 30 percent S and 70 percent G, but I am sure that is not good. Could you assist me? A. Why did you choose this inefficient allocation? If you’re not sure which allocation best suits your needs, try the L Fund with the maturity that most closely matches your life…
Q. Can a wife roll over her 401(k) distribution into her husband’s Thrift Savings Plan account? A. No.
What will you do if Congress raises the amount you must contribute to your pension? That’s a question that many of you should be prepared to answer — just in case. In the current environment, every federal employee should be considering the most likely threats to his or her financial plan. One threat that should be on your radar is a bill the House passed May 10 to raise employees’ pension contributions by 5 percent of their pay. I thought I’d take a stab at quantifying the impact of this bill on an individual employee. I considered a hypothetical employee,…
Q. My husband retired from 36 years of federal service on June 2. He is in CSRS. We hope he will begin receiving his check within a month or two. Given that he retired halfway through the year, and given that his initial checks will be only 60 percent to 70 percent of what is due, we anticipate that he could get the money owed for those first months in a lump sum in the next tax year. This could be a sizable sum and could have significant tax consequences. It also makes it hard to plan for the correct amount…
Q. I plan to retire next month at age 62 and withdraw my entire Thrift Savings Plan account. I know that they will withhold 20 percent for federal taxes, but how can I keep from being taxed on that amount as income in the same calendar year? With my current rate of pay, adding some $300,000 to $400,000 in the TSP withdrawal will surely kill me in taxes. A. Assuming that you are determined to withdraw your entire account balance at once (why would you do this?), you can roll over part of your withdrawal to an IRA.