Q. I will be 63 years old in August. I have made a previous partial Thrift Savings Plan withdrawal but need another for a down payment on a home. 1. Can I make another partial withdrawal? If not, what regulation dictates that I cannot? 2. If I can’t make another partial withdrawal and decide to take monthly payments, can I set the monthly payment amount or does TSP have a required monthly distribution rule? And will the remaining balances continue to earn income? A. You are limited to one partial withdrawal during your lifetime. I’m not a lawyer, so you’ll…
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Q. The guidance on partial withdrawals from the Thrift Savings Plan is somewhat confusing if you have both a traditional and Roth portion. It says that withdrawals will be prorated between the two. However, is it possible to solely roll over the Roth portion into another Roth and still leave the entire traditional portion in tact? Or, since these are two distinct types of investments, can the Roth be rolled over into a Roth and the traditional be rolled over into a traditional in amounts, say $5,000 of one and $10,000, even if the balances are not in this same 1:2 ratio?…
Q. So if I follow all the rules related to my current Thrift Savings Plan account, and I begin making systematic withdrawals under the annuity factor method at age 55: 1. Can I contribute to my new employer’s 401(k) while drawing from my TSP? (I may want to take a downscaled job and subsidize the lower income with my TSP distributions.) 2. Are any Internal Revenue Service restrictions in place regarding my Roth IRA because I am taking distributions from my 401(k) at age 55? A. Yes, you may contribute to a 401(k) while taking distributions from your TSP account,…
Q. I just finished paying off a Thrift Savings Plan loan, and the last loan payment was greater than the necessary last payment. Apparently, the difference will be sent to me by check. Does this count as a disbursement? Will I have to pay a penalty on this money? How can I just put it back into the TSP where it belongs? A. It doesn’t belong in the TSP. It’s an overpayment and will be refunded to you with no distribution or tax liability accruing.
Q. Can you elaborate more on the “Ask the Experts” answer at http://blogs.federaltimes.com/federal-money/2011/02/16/rolling-a-portion-of-tsp-balance-into-self-directed-ira/. The answer seems to imply that under some circumstances, Thrift Savings Plan funds can be rolled over into self-directed IRAs. Can you explain the circumstances under which it’s legal, and can you provide references? I’d like to create a self-directed IRA for my husband, who is 45 years old and no longer in federal service, and then use the funds to purchase a rental property, with the monthly rents going directly into the IRA. A. Rollovers are allowed for TSP participants who are no longer federal employees or…
Q. My wife retired under a Voluntary Early Retirement Authority in August 2011. Her 1099-R displays a “1” as the distribution code in Block 7 of the form, “no known exceptions.” For years 2011 and 2012, we paid a 10 percent tax penalty for early withdrawal from her Thrift Savings Plan. I know the tax is usually levied unless the person is 59½ years of age, but at what age will the code on the 1099-R change for my wife so we won’t have to pay this tax? Will she benefit at some point because her retirement was a VERA, and at…
Q. I am below the age for Thrift Savings Plan withdrawal without penalty (soon to be 50), but it looks like I will be out on workers’ compensation under permanent disability shortly. Due to the impact on my income and an ongoing issue, I need to make a withdrawal or close my TSP to continue meeting my obligations. I have thoroughly researched the issue of using a TSP but have little choice. A loan is not an option (I’m paying one off and, if I’m on disability, I can’t take one out). And I’ve looked into other avenues, to include…
Q. How often am I able to change my allotment amount being drawn from my Thrift Savings Plan account yearly monthly, etc., while retired? Can I still move my money between funds after I start receiving the allotment? A. If you’re referring to automatic monthly distributions, the amount can be changed once each year, effective in January. You may, and are responsible to, continue to manage your account for as long as it continues.
Q. I have a general purpose loan and am planning to retire soon. If I choose not to repay the loan and take a tax distribution, will I still be entitled to make one partial withdrawal after retirement? Or will the unpaid balance of the loan be considered my one-time partial withdrawal? A. The unpaid loan does not count as your partial withdrawal.
Q. I am 65 years old and will collect my first Social Security retirement check this month. I have been employed by the federal government for the past nine years; therefore, I have been enrolled in the Thrift Savings Program. If I retired today, my TSP benefit would be approximately $400 a month. Will my Social Security or TSP benefit be penalized because I am drawing benefits from both accounts? A. It is possible that the taxes you owe on your SS benefits could affected by your annual income, including TSP distributions. See www.irs.gov/uac/Are-Your-Social-Security-Benefits-Taxable%3F for more info.