Q. We are getting ready to be offered an early retirement under the Voluntary Early Retirement Authority. I’m a Civil Service Retirement System employee, and I’m thinking about taking the offer. I would like to withdraw my Thrift Savings Plan, but I won’t be 55 until Feb. 22, 2012. Is there any way of getting around paying the 10 percent Internal Revenue Service penalty for early withdrawal under the age of 55? A. If you actually separate from service on or after Jan. 1, 2012, your TSP withdrawals will not be subject to the early withdrawal penalty. If you separate…
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Q. I have two questions on the Thrift Savings Plan MetLife annuity. On page 11, paragraph 1, under the heading, “How Your Annuity is Taxed,” in the TSP pamphlet, “Withdrawing your TSP Account After Leaving Federal Service” (June 2007), reads: “… your TSP annuity payments will be taxed as ordinary income in the years when you receive them. However, these annuity payments are not subject to the IRS early withdrawal penalty, even if you are under age 55 when they begin.” As both my wife and I are under 55 and are considering an early out/buyout that has just been…
Q: May I make a partial withdrawal from my TSP account when I retire, if I am 55 years old? A: Yes.
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as a specifically equal periodic payment (SEPP) until I turn 59 1/2, or may I change the monthly amount that is being withdrawn at the end of the year, without causing…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 will be 70 in February and realize I have until April 2012 to make my decision about how to distribute my funds. But I am doing my best trying to make a good decision. I am a CSRS retiree, single, no dependents, and have slightly less than $100,000, so not a huge amount. I spoke with a bank, and their advice was to withdraw the whole sum and roll it over into an IRA, which would be a Mutual Fund with a management fee of 1.6 percent. My thinking is that it would be better to take a…
Q: Mike Miles answered a recent question about Thrift Savings Plan withdrawal by saying that the person making the withdrawal pays the taxes and penalties when filing a tax return, but that the TSP will withhold 20 percent for future liabilities. I’m not sure what that means: If the taxes and penalties are paid when we complete our tax returns, why does TSP withhold 20 percent, and what happens to that money? What could be a future liability? Do we ever get the 20 percent back? A: The TSP withholding is mandatory; the 20 percent will be deposited with the…
Q: I am planning on retiring next month when I turn 50. I would like to take monthly installments based on the IRS life expectancy tables to avoid the 10 percent penalty for early withdrawal. Would I still be able to make a withdrawal for my son’s college fees and still avoid the 10 percent penalty? A: You’re planning to use the life expectancy method for calculating withdrawals that will satisfy the exception to the early withdrawal penalty. This exception is allowed under IRS code section 72(t). One of the requirements for meeting this exception is that exactly the correct…
Q: I have recently left federal service on a deferred retirement. I have about 27 years of service and am 50 years old (49 when I left service). If I withdrawal part of my Thrift Savings Plan account, is there a penalty, or do I simply have to pay income tax on the withdrawn amount? I have some very unexpected bills with the death of my son and do not want to pay monthly payments for a loan. I plan to withdraw about $50,000. A: It sounds like you’ll be subject to the penalty unless you can meet one of…
Q: In a Dec. 13 blog post, you answered the following question: “I am a federal firefighter under CSRS Special Retirement due to retire in November 2011 at age 50. At what age will I be able to collect on my TSP retirement?” You said that the writer would be subject to the early withdrawal penalty until age 59 1/2 unless the withdrawal was rolled over, used to buy a life annuity or met one of the other “specific exceptions to the rule.” I’m an 1811-series federal employee, age 52, and will be retiring in 2011. I’ve read that I…
Q. I am a widow, CSRS, retired. I will have approximately $55,000 (before taxes) when I am 70 1/2 (January 2017). My birthday is July 1946. I am a widow; file single; do not want an annuity. I know my circumstances and the law could change a lot before then. Would they take 20 percent or 30 percent before giving it to me? Any suggestions? A. Under the current rules, if you take a required minimum distribution as a single, partial withdrawal, it will be subject to 10 percent tax withholding unless you elect to have a larger amount withheld. If…