Q. I am a FERS employee with 14 years service, age 53. Tired of the pay freeze and “no money for promotions” line. Also tired of doing the jobs of higher paid co-workers while they call in sick two to three days a week. If I resign, can I take my FERS and Thrift Savings Plan in one lump sum and walk away? I am also a military retiree and have my pension and Tricare health care plans from that, so that is not a concern. Understanding the tax hit, will I just receive what I contributed, or the fed matching,…
Browsing: early withdrawal penalty
Q. I have been reading your responses to the questions of federal agents and early withdrawals of their TSP accounts. The publication, 575, specifically states that law enforcement officers are exempt from the penalty if they are at least in their 50th year and the plan is a “qualified retirement plan.” IRS Form 8880 instructions refer to the TSP as a “qualified retirement plan” and in various other places within the IRS publications. Why do you insist it is not? Can you please clarify your position on this? Also, the IRS defines a law enforcement officer as one that is authorized…
Q. I was downsized when I was 46 and rolled over everything into a 72(t). I am currently withdrawing from it monthly as I cannot find a job that pays enough to live off of. I am in a situation now where I need some extra money to clear off some debt and buy a new car. Can I take a one-time withdrawal from my 72(t), in addition to my monthly? If so, what are the tax implications? A. You may not change the annual withdrawal scheme as calculated and required under 72(t). If you do, the 72(t) exception to the…
Q. I will be retiring with 20 years active-duty military in two years and am thinking about tapping into my Thrift Savings Plan for a 20 percent down payment on a home. I realize withdrawing early includes penalties I don’t want to pay. Would taking out a TSP loan be my best option? I’d like to use about $30,000 toward my retirement home, and the interest rates seem low enough I wouldn’t take that much of a hit. A. If you can repay it, a loan would be a reasonable way to avoid the early withdrawal penalty.
Q. I will be age 54 at retirement. As a retired federal law enforcement officer, am I exempt from the 10 percent penalty for early withdrawal from my Thrift Savings Plan at retirement? I keep reading public safety personnel are exempt, but it reads as applying to state or municipality, but my status is federal. A. No, your LEO status does not exempt you from the early withdrawal penalty.
Q. When I retire at age 57, can I withdraw a small portion of my Thrift Savings Plan, pay the 20 percent penalty and leave the remainder as set monthly payments with the tax as three dependents? A. If you retire at 57, you may take a partial withdrawal, if you haven’t already taken one, with no early withdrawal penalty. You may also take a full withdrawal as a series of monthly payments. Check the table on Page 3 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf for information on tax withholding requirements.
If you own a Thrift Savings Plan account and plan to use it to fund your standard of living in retirement, you are a pension fund manager. As a pension fund manager, you are responsible for the standard of living your TSP account produces. This standard of living will depend heavily on the decisions you make in the course of managing your account. It is critical to recognize that a single stumble along the way — one bad outcome from one bad or overlooked decision — can cost you dearly later in life. The margin for error is razor thin,…
Q. I will most likely be medically separated from the military next year after 25 years of service. I have bone cancer that is incurable but manageable — 50 percent life expectancy is 10 years. I am 47, so if I live 10 years, I would be 57 and still ineligible to withdrawal my Thrift Savings Plan. Are there exceptions for terminal disease that allow you to withdraw early without penalty? A. The list of available exemptions appears on Page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.
Q. I have been in the Foreign Service since 1986 and am being involuntarily retired for expiration of my time in class on Sept. 30, 2014. I will be 49 years old at the time. Even with an involuntary retirement, do I still get penalized for any lump-sum payment I take from the Thrift Savings Plan? I know annuities and equal payments are not penalized. A. There is no exception to the early withdrawal penalty for involuntary retirement.
Q. I have more than 20 years of service as a federal law enforcement officer and will turn 55 in 2014. I plan to retire under FERS from my agency this year, before my age 55, and immediately (with no break in service) become re-employed on a full-time basis with another federal agency. I understand that my salary during the period of re-employment will be offset by the amount of my FERS annuity, and that retirement deductions (including Thrift Savings Plan contributions) will be made from my re-employment salary. I understand further that I would earn a supplemental annuity upon termination…