Q. I cannot find the origin of the law, rule or whatever the decision process was to subject monies withdrawn from 401(k) and retirement funds to the 10 percent penalty if one has not reached 59½ years of age. Was this legislated? Was it an Internal Revenue Service decision? How did it come about? A. This question falls outside the scope of this forum. You should pose it to a legal historian.
Browsing: early withdrawal penalty
Q. I am a 66-year-old female who retired in January 2007, with more than 30 years Civil Service Retirement System service. I am thinking of withdrawing my Thrift Savings Plan savings. I understand that I will not be penalized the 10 percent, and I would have to pay the mandatory 20 percent if I decide to withdraw. Does the 20 percent also apply at age 70½? Does this also apply to partial withdrawals, and do you have to pay back if you do a partial? Is the amount taxed by the Internal Revenue Service on your entire TSP earnings? What percentage…
Q. I would like to know if there are any options to remove any portion of Thrift Savings Plan balance (e.g., my own contributions), prior to separation, retirement or a disability. I do not want to leave government service, nor am I eligible to retire. But I would like to control my own investment choices and am willing to consider paying an early penalty and taxes to withdraw the funds. A. If you are at least age 59½, you may take one age-based, in-service withdrawal. If not, you may not withdraw or roll over your TSP assets unless you can prove…
Q. I will be 54 this year, a FERS employees with a minimum retirement age of 56. I am taking early retirement and leaving the end of July with 32 years of service. What can I do to avoid the 10 percent TSP early withdrawal penalty if I want to start withdrawing this year or early next year? A. If you’re not fully disabled or have huge medical expenses, you’ll need to either take a series of Substantially Equal Periodic Payments as allowed under IRS code section 72t or use your funds to purchase a life annuity. You should consult…
Q: I have been awarded 100 percent permanent and total disability from the VA. I would like to take an early full withdrawal of my TSP. I have seen a comment that a waiver for the 10 percent penalty would be exempt, does the 20 percent early withdraw still apply? A: I assume that you are asking whether, or not, mandatory tax withholding will apply to a full, lump-sum withdrawal of your TSP balance. I believe that you will be subject to mandatory 20 percent withholding from the withdrawn amount, but there may be an exception in your case. You…
Q: Wouldn’t someone have a penalty for taking out Social Security benefits before age 66 such that the person would not be getting $21,000 at age 62? A: No, $21,000 is approximately the maximum Social Security benefit at age 62.
Q: I am 57 years old. I retired from civil service on Dec. 31, 2010. I have not taken anything out of my TSP account. I would like to withdraw a partial payment from my TSP account and then set up monthly payments. Will I have to pay the 10 percent penalty, on the partial payment, since I am now 57 years old and have been retired for almost six months? A: Since you retired during or after the year in which you reached age 55, you will not be subject to the 10 percent early withdrawal penalty.
Q. What are the answers to the below questions if under age 55? For instance, taking a early retirement option at age 53 — how would the TSP 10 percent penalty apply using the original scenarios in the question?? Original question: Q. I have read many of the articles and TSP literature and I am still a bit confused. As a federal law enforcement officer over age 55, I plan to retire later this year. I have read that if I want to take withdrawals from my TSP account prior to age 59½, I can do so without having to…
Q. I am planning retirement, as a FERS law enforcement officer, at age 56, with 26 years of service. If I take a specified dollar monthly amount from my TSP at the time of separation, which is not based on life expectancy, it is my understanding that it will not be subject to the early withdrawal penalty of 10 percent. However, must I continue to take this same payment as a specifically equal periodic payment (SEPP) until I turn 59 1/2, or may I change the monthly amount that is being withdrawn at the end of the year, without causing…
Q: I’m 57 and just retired from CSRS a month ago with 30 years of service. I want to do a full withdrawal to pay off my mortgage but I’m trying to determine if I will have to pay the 10 percent penalty tax. According to page 4 of the TSP-536 (1/10) flyer, “the additional 10 percent tax generally does not apply to payments that are: Paid after you separate from service during or after the year you reach 55.” The word “generally” concerns me. I read the TSP Withdrawing Your TSP Account After Leaving Federal Service, dated June 2007…