Q. I will be 56 this month and have 27 years of federal service. I plan to retire in February. Will I be able to draw an immediate monthly income from my Thrift Savings Plan upon retirement without incurring the 10 percent penalty for early withdrawal? A. Yes.
Browsing: early withdrawal penalty
Q. Why do the Thrift Savings Plan publications say age 59½ is the earliest someone can receive TSP monies without a penalty, yet I read in your responses to questions that as long as someone retires in the year in which they reach 55 or later, there’s no penalty? I heard someone else at work yesterday who plans on retiring under MRA+10 saying he has to wait until 59½ so he won’t incur a penalty. Why are there two different prevailing understandings? A. The standard rule applies the early withdrawal penalty to those who have not yet reached age 59½. There…
Q. I am an air traffic controller who will be forced to retire in May 2016 when I turn 56 with 28½ years of service time. If I retire anytime between Jan. 1, 2015 (the year I turn 55) and May 2016, will I be able to take out a lump sum and monthly payments from my Thrift Savings Plan without the 10 percent tax penalty? Do I have to follow the life expectancy requirement for receiving monthly payments, or am I free to set the payment amount as I wish and adjust it once a year? A. Since you…
Q. I am a civilian employee. I have FERS and the Thrift Savings Plan. Is there any provision that would allow me to cash out my TSP for it to be applied directly to my federal student loans without any type of penalty? A. Check the list of exceptions on Page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf. Student loan repayment is not the basis for an exception to the early withdrawal penalty.
Q. My husband happens to be one of the 800,000 who got furloughed. I have an IRA of $3,400. Would I be able to cash that in without a penalty to get us by for, say, a month or so, depending on how long the furlough lasts? A. There is no exception to the early withdrawal penalty for a government furlough. You will be subject to the penalty unless you are age 59½ or meet one of the other exceptions to the penalty described in Internal Revenue Service Publication 590.
Q. I have two Thrift Savings Plan accounts — one with the military and one civilian. Because of my financial situation, I would like to take some money out for debt consolidation. I was weighing the option of borrowing from my civilian vs. closing my military account (which I am no longer contributing to) and using those funds. If I close my military account, can I roll a portion of it over to my civilian account, and use the rest? What/how much of a tax penalty am I looking at if I do either? Would it make sense to close my military…
Q. How will Voluntary Early Retirement Authority/Voluntary Separation Incentive Pay affect my retirement benefits (annuity supplement, Social Security, pension and Thrift Savings Plan withdrawals)? I am an Air Force civilian GS-13, age 52, with 26 years of service under FERS. A. A VERA/VSIP will not affect the rules governing your TSP withdrawals. You will be subject to the early withdrawal penalty until you reach age 59½ unless you can qualify for one of the exceptions listed on the left side of Page 7 of this notice: https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.
Q. I recently lost my job and withdrew my entire Thrift Savings Plan savings. I know that there is a 20 percent penalty for early withdrawal that they took out. Also, another 10 percent penalty that they hit you with at the end of the tax year. Is there any way I can lessen the blow? Are there any exemptions that I could put that money to, such as paying of my son’s college loans, home improvement or repairs? A. The 20 percent taken from the distribution was withholding against your federal tax liability for the year of the withdrawal. The…
Q. I’m planning on a FERS retirement at the end of December 2014. At that time, I’ll have already met the minimum retirement age and will have credit for 32 years of service. I’ve read that I can withdraw funds from the Thrift Savings Plan without an early withdrawal penalty upon my retirement, and that approximately 20 percent will be withheld for federal taxes, but what I don’t know and can’t seem to find is the amount of money that will need to be paid to my state of residence, West Virginia. My plan is to use the money in…
Q. I am 49 years old and have 24 years of service with the Bureau of Prisons. If I retire at age 51 with 26 years of service and elect a life expectancy withdrawal from my Thrift Savings Plan account, would I be able to change to a specified amount at age 55 without a 10 percent penalty, or will I have to wait until age 59½ to change my withdrawal option to avoid the 10 percent penalty? A. To meet the 72(t) exemption to the early withdrawal penalty, your series of payments cannot change until it has been completed —…