Q. I am a CSRS 50-year-old employee who would like to withdraw $80,000 from my TSP to cover unsecured debt. Is this smart? My debt is strangling me. What is the tax hit and how can I avoid it? A. You don’t have the option to make a withdrawal unless you can demonstrate financial hardship under the TSP’s definition. If you take a Financial Hardship withdrawal, you will owe tax on the amount you take and you will be subject to the 10 percent early withdrawal penalty. You can, and should consider taking a loan, instead. Taking a loan will…
Browsing: early withdrawal
Q: I am a firefighter about to be forced to retire at 57 years old because of the mandatory retirement age. I plan on taking out my Thrift Savings Plan earnings to buy my house when I retire. Do I still have to pay the 10 percent penalty for withdrawing from my TSP before turning 59 1/2 even though I was forced to retire because of my age? A: Because you are retiring during or after the year in which you reach age 55, your subsequent TSP withdrawals will not be subject to the early withdrawal penalty.
Q: My position was eliminated when I was 51 years old. I retired with more than 30 years of service. I would like to withdraw all of my funds from the Thrift Savings Plan; will I be required to pay the 10 percent federal penalty if money is taken out prior to age 59 1/2? A: Unless you meet one of the special exceptions to the early withdrawal penalty, you will have to pay it. For details, see the tax notice regarding distributions from your TSP account at the TSP website.
Q: I worked for the federal government for about 12 years. When I left, I used some of my Thrift Savings Plan money as a down payment on my current home. That turned out to be a good move, since I bought when the market was down and my home’s value has gone up. However, with the recent downturn in the market, my parents have lost a tremendous amount of money and are in financial need. I would like to give them the remaining money in my TSP account (about $10,000). Is there any way to roll over my TSP…
Q: The TSP website states that there is not a 10 percent penalty for early withdrawal if the withdrawal is made in a year that you have deductible medical expenses over 7.5 percent of your total income. If I made a withdrawal of $20,000 and my total income was $32,000, would there be no penalty at all? Seven and a half percent of $32,000 is $2,400. If my medical expenses were $4,400, would there not be a penalty, or would I have to pay a penalty on $18,000 {4,400-2,400 = 2,000} A: As I understand the rules, the early withdrawal…
Q: I turned 55 this year and just applied for disability retirement under the Federal Employees Retirement System. I have large bills I want to pay off. My income will drop the first year, then will decrease $1,000 the following year before continuing at that rate. I realize if I keep my Thrift Savings Plan or roll it over once I leave service, I will not be able too take a loan on it. I realize I will need to pay my fair share of taxes, but is there a way I can work it out that I can take…
Q: How much money can you take out for your one-time withdrawal without tax penalties? I am retiring under 6c, federal law enforcement retirement, at age 50. A: Unless you meet one of the special exceptions to the early withdrawal penalty, the amount will depend upon your life expectancy and the calculation method you choose. This excerpt from my July 23, 2007, Money Matters column should help: “Another exception to the early withdrawal penalty — one that is available to anyone — is to take distributions before reaching age 59 1/2 as a series of so-called substantially equal periodic payments…
Q: I have checked your Q&A and have asked several people about the special retirement supplement (SRS) and can`t seem to get an answer. I’m a 56-year-old Postal Service employee with 22 years of service. Rumor has it there will be another VERA (early out). My two questions are, if I go out on VERA will I be able to take money out of my Thrift Savings Plan account without early withdrawal penalties even though I`m not 59 1/2 years old? I know I will be eligible for SRS. Will the fact that I will be getting SRS, an annuity…
Q: I am currently in a Civil Service Retirement System 6C designated law enforcement officer position. Aside from my CSRS retirement benefits, of which I will reach the maximum annuity of 80 percent at the end of this year, I have also contributed to the Thrift Savings Plan. I am not planning on relying on my TSP funds to supplement my retirement. I know there are ways to avoid the 10 percent tax penalty for early withdrawals before turning 55 years old (taking the money in a monthly annuity, etc.). I would like to take all of my TSP out…
Q: Your response to an earlier question on Voluntary Early Retirement Authority/Voluntary Separation Incentive Payments puzzles me. If a federal employee is eligible for a retirement annuity under the Federal Employees Retirement System despite the fact they are taking an VERA/VSIP, why would there be a penalty for “early” withdrawal of TSP? A: I think that I clearly stated a fact (“There is nothing in your question that will exempt you from the early withdrawal penalty.”) that answers your question.