Browsing: early withdrawal penalty

FERS disability

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Q. I fell under FERS disability. What percentage will I be hit with on a full withdrawal of my TSP? I am under the 55 age limit. A. The withholding for federal taxes will be 20 percent. The tax and early withdrawal penalty you actually owe on the withdrawal will be calculated when you file your tax return for the year. Unless you qualify for one of the exceptions listed on the left side of Page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf, in addition to income taxes, your withdrawal will be subject to the 10 percent early withdrawal penalty.

Permanently disabled

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Q. I am totally and permanently disabled by the VA due to service-connected disabilities. Can I withdraw some of my TSP without the 10 percent penalty? I’ve done some research and all I can find is the 10 percent penalty does not apply to people with total and permanent disabilities, but all the literature implies this rating comes from the Social Security Administration. A. The TSP does not levy the penalty. You must convince the IRS that you meet the disability exemption requirement. You are permanently and totally disabled if you cannot engage in any substantial gainful activity because of…

TSP and VERA

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Q. Can I withdraw from my TSP if I accept a VERA with 30 years of service and my age is 47, or is there a penalty? If so, how much? A. If you separate from service before the calendar year in which you reach age 55, you will be subject to an IRS 10 percent early withdrawal penalty unless you qualify for one of the exceptions listed on Page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.

Partial TSP withdrawal

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Q. I have 36 years of FERS service with retirement at MRA 56 and four months. If I wanted to take a partial withdrawal of TSP at retirement (early withdrawal, before 59.5), do I have to elect to do this immediately when I retire or could I wait a year and request this? A. You may wait as long as you like.

L fund inquiry

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Q. I’m a 40-year old mailman with 17 years service. I plan on leaving the post office when I hit 52 (30 years service). I understand I need to leave my TSP alone until 55 without penalty. My house will be paid off before I’m 51. I plan to work part-time with less stress after 52. I have $91,000 in traditional TSP now ($15,000 in L2030), the rest in G fund. I just switched from 10 percent to 15 percent payroll withdrawal. Should I change my contribution to 100 percent going into L fund, or remain with my current 70/30…

Withdrawal after retirement

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Q. I am an operations manager for the FAA covered under CSRS. I plan to retire Dec. 31, 2016, at the age of 55 with 34 years of service under the controller bill. Can I make a total withdrawal from my TSP in 2017 without paying the 10 percent early withdrawal penalty? A. Yes.

Early withdrawal penalty

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Q. I am a retired law enforcement officer with 25 years of service. I retired from the Bureau of Prisons in December 2009 at age 48. I am receiving my pension and the supplemental annuity. I have $300,000 in my TSP account and want to start withdrawing it. What are my options to begin receiving money from the TSP without buying an annuity and not having to pay the 10 percent early withdrawal penalty? Can I take a one-time distribution of say $100,000 without penalty? Can I withdraw the whole amount without penalty? Can I take $2,400 per month out…

TSP to IRA

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Q. Can I take my money out of the TSP and pay the penalty? Is there any way to get all my money out without having to retire or quit? If so, can I then move it into another self-directed IRA? A. The only ways to remove money from your TSP account before reaching age 59-1/2 while you are still a federal employee are: a loan and/or an in-service financial-hardship withdrawal. Neither of these may be rolled into an IRA account.

TSP withdrawal

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Q. I’m 26 and I’m planning to get out of the Army next year. If i withdraw all the money and stop my TSP account after leaving the military, would I be charged for anything? If yes, what would it be ? A. You will be subject to income tax and the 10 percent early withdrawal penalty unless you qualify for one of the exceptions on Page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.

Tax question

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Q. I’m a federal employee aged 58 retiring with 30 years’ service, and I would like to take 109,000 from my non-Roth TSP to pay off mortgage. Besides federal tax, would I also have to pay a 10 percent penalty because I am not 59 1/2 years old? Would the federal government withhold 20 percent penalty or taxes or would it be more? A. There will be mandatory withholding of 20 percent, but the early withdrawal penalty will not be assessed. Details are available at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.

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