Q. I retired in 2005 with 30 years in the military. I am 58 years old. If I want to make a full withdrawal now, how much will I pay in taxes? If I wait until I’m 59½, will I pay less? A. TSP withdrawals are taxed as ordinary income. The amount of income tax you pay will depend upon your tax return for the year in which you take the withdrawal. If you withdraw the money before you reach age 59½, you will likely also have to pay the 10 percent early withdrawal penalty. You’ll avoid this penalty by…
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Q. 1. I have $12,000 in student loans at about 6.5 percent interest rates. I had considered taking a loan from my Thrift Savings Plan account to pay off my balance as the interest rate I would pay back on the TSP loan is lower than my Stafford Loans. What is the maximum amount one can take out on loan from their TSP account? What is the repayment time frame demanded by TSP? 2. If I were able to pay off my Stafford loans with a TSP loan, I am not sure that would be the best decision. I am…
Q. I understand that the lump-sum payment for unused annual leave is treated as wage and salary income and is subject to federal and state (if any) income tax, FICA (Social Security) and Medicare taxes. How is it treated for Thrift Savings Plan purposes? Are individual and government matching contributions made? Can a retiring employee top up their contributions from the lump sum (up to the IRS-determined maximum)?
Q. Does the withdrawal of your Thrift Savings Plan annuity affect the amount of your special retirement supplement or Social Security if it exceeds the maximum amount of money you are allowed to make under Social Security?
Q. I am 64 years old and will be retiring in a year. I have 15 years with the federal government. Do all of my Thrift Savings Plan contributions have to be withdrawn prior to a specific age? I also understand that my total TSP account will be charged 20 percent. Am I to understand that after the 20 percent is subtracted from my TSP account, I have to pay income taxes per year for withdrawals I make from my TSP account that will be added to my total gross income? A. You will be required to begin taking minimum annual distributions…
Q. I have both a civilian and military Thrift Savings Plan account because I was mobilized for part of 2011-12. Because I was in a combat zone, much of my income was tax exempt (CZTE). The military allowed me to contribute that tax-exempt income into my TSP. It is not a tax deduction because the income wasn’t taxable in the first place. However, they also made contributions from my taxable income. I thought it was all from my CZTE. When I returned to my civilian job, I began to contribute and maxed out my contributions, not knowing about the earlier…
Q. I am below the age for Thrift Savings Plan withdrawal without penalty (soon to be 50), but it looks like I will be out on workers’ compensation under permanent disability shortly. Due to the impact on my income and an ongoing issue, I need to make a withdrawal or close my TSP to continue meeting my obligations. I have thoroughly researched the issue of using a TSP but have little choice. A loan is not an option (I’m paying one off and, if I’m on disability, I can’t take one out). And I’ve looked into other avenues, to include…
Q. I am a letter carrier, age 52, started in 1985 and have 28 years of creditable service. If I understand what I’ve gleaned from the posts here and the Postal Service were to offer me a Voluntary Early Retirement Authority this year, 1. Would I begin my annuity immediately? 2. Would I have no reductions in calculations of my annuity? (average high-3 x 1 percent x 28) 3. Would I receive credit for half of my sick leave and all of my annual leave? (How are these applied?) 4. Would I receive the special retirement supplement beginning at age…
Q. At age 65, I’ve taken your advice and have taken a full physical. I’m being very positive and very optimistic when I say I expect to be around for another 15 or 20 years. In retirement, I’ve put all of my money in the L-2030 fund, as suggested. Does it stay in the L-2030 fund when I reach the required minimum distribution age, or does it get put in the L-income fund? A. The management decisions are up to you, but my default recommendation, if you don’t know what else to do, is to continue to use the L…
Q. I was approved for disability retirement in November under FERS due to my diagnosis of a malignant, incurable brain cancer (my life expectancy is six to nine months). I withdrew my Thrift Savings Plan in lump sum ($29,000) to pay my medical and living expenses. I am including my TSP distributions in my tax return. If I understand correctly, my TSP money should be added to my earned income (for example, if I earned $50,000 + $29,000 TSP =$79,000 total year of 2012 income) and it will be taxed as ordinary income. Is there any way for a terminally…