Q. After entering retirement from CSRS, are Thrift Savings Plan funds withdrawn classified as income in addition to the 20 percent accessed at the time of withdrawal from the TSP account. Are there ways to avoid double taxation if they are taxed twice other than rolling over into an IRA or Roth IRA? A. The traditional TSP funds you withdraw are classified as ordinary income on your tax return. They are not subject to double taxation. The 20 percent withheld from your payment(s) is a deposit against your tax liability. If the distribution is not a required minimum distribution and you…
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Q. I have to retire in 18 months. I plan on taking a lump sum and monthly allotment from my Thrift Savings Plan at retirement. I understand both of these will be taxed at 20 percent. I am thinking of taking a TSP loan for the amount I had planned on requesting as my lump sum prior to my retirement date, with the understanding that I won’t have the time to pay it back in full and that the amount I don’t pay back will be considered disbursed income. My reasoning is that having the funds now will allow me to…
Q. If I have Thrift Savings Plan funds in both G and C funds when I am required to begin taking required minimum distributions at age 70½, can I specify which funds the RMD are taken from? (My concern is that the C Fund may be at a low due to market conditions, and withdrawals may be better to defer till the market improves.) A. TSP distributions are always taken proportionately from your various holdings at the time. I don’t see the rationale for your concern, though. Your account will be allocated exactly as it was before the withdrawal. If…
Q. 1. I am retired at 52. If I take a life expectancy withdrawal through the Thrift Savings Plan from now until I reach 59½, can I then roll over the balance of my account to a privately held traditional TSP such as Vanguard? Or does taking the life expectancy withdrawal through the TSP commit me to them for life? 2. If I receive life expectancy withdrawals now through the TSP, can I still take a partial withdrawal (amount of my choosing) when I am 59½ without the 10 percent penalty? 3. If I roll over my entire TSP account now to a…
Q. Are federal taxes taken out of the lump-sum payment for annual leave? And If I withdraw all of my Thrift Savings Plan upon retirement, will the tax be taken out before I receive the payment? A. Mike: A lump-sum distribution from your TSP will be subject to 20 percent minimum federal tax withholding. Reg: Yes, federal taxes will be taken out of your lump-sum payment for unused annual leave.
Q. I have selected a retirement date of June 28, 2014. I will be 59½ years old with 33½ years of government service. I have been FERS my whole career. I have $365,000 in my Thrift Savings Plan. I will retire with a high-3 at GS-13, Step 4 and a 16.51 percent locality pay. I am debating paying off my mortgage on my retirement home by taking a partial withdrawal from my TSP. The reasons for this are: 1) Escrow of property taxes 2) Flood insurance imposed by Dodd-Frank 3) Desire to be mortgage-free in retirement. I owe $185,000 on…
Q. I have between 10 and 15 years to work until retirement (I am 52 yrs old). Right now, my contribution allocation is: S: 25 percent C: 25 percent L: 20 percent G: 30 percent The distribution is more diversified. What do you think? I don’t know what I am doing; therefore, I am just guessing. A. Your allocation is basically: 50 percent stocks, 20 percent bonds and 30 percent cash. This would generally be considered a moderately conservative allocation. Whether, or not, it’s right for you is impossible to say without more information and analysis, but it doesn’t appear to…
Q. My wife works for a dental office which has a profit-sharing plan. Only her employer makes contributions to this pretax plan. She will retire in one more year. We would like to do a direct rollover of her funds into my Thrift Savings Plan, so that all holdings can be distributed from this one account. However, I have been told by TSP personnel that the ownership of any plans to be transferred must be in my name, not my spouse’s name. Is there any legal way for getting her profit-sharing plan funds to transfer into my TSP account? For example, since I am 2½ years…
Q. Based on a reading of Internal Revenue Service Publication 721, it appears to say that since the CSRS and FERS retirement systems are considered “eligible retirement plans” you could roll over a distribution (including a regular annuity payment) into another IRA and defer the taxes, or into a Roth IRA and pay the taxes immediately. If this is the case, the normal IRS limitation on contributions to IRAs and Roth IRAs are bypassed. Am I reading this correctly? A. From IRS Publication 721: “Distributions eligible for rollover treatment. If you receive a refund of your CSRS or FERS contributions when you…
Q. I recently retired from the federal government due to becoming permanently disabled at age 61. I received my disability approval from the Social Security Administration. I withdrew a portion of Thrift Savings Plan funds to cover expenses as a result of not being able to work. Why was 20 percent tax deducted from the distribution of funds at age 61 and with the legal purpose of being disabled? A. Because that is the default federal income tax withholding rate for the distribution. The money has been applied toward your tax liability for the year.