Q. My husband has 10 years of Air Force service and is in the process of negotiating to take a federal position. Is it possible to use a 401(k) rollover to buy back his service? I am thinking not, since a rollover is only allowable to an IRA or other “qualified plan.” We certainly can take a direct taxable distribution of a portion of that 401(k) plan and use that money to buy back, but he wondered if it can be done with the rollover. A. No.
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Q. What Thrift Savings Plan options are available upon retirement other than purchase of an annuity? What rules govern TSP rollovers to an IRA? A. You may leave your money in the TSP and manage it there for life; you may take one partial withdrawal; you may take a full withdrawal as a lump sum or a series of monthly payments, or some combination of these. Internal Revenue Service rules govern rollovers to an IRA. Visit www.tsp.gov for more information.
Q. I just completed six years of service in the Army. I have been making contributions since I enlisted thanks to my supervisor at the time. I would like to know: what the penalty is for an early withdrawal. Also, will I be penalized for transferring it over to another retirement plan? A. The early withdrawal penalty is 10 percent of gains withdrawn, when it applies. You may roll your Thrift Savings Plan balance into an IRA or other qualified retirement plan to avoid the penalty and current taxation. Of course, you may leave your money in the TSP and…
Q. I’m a 45-year-old reservist who has been recalled to active duty. I’m also an E-6 with more than 18 years of service. I can afford to invest my entire pay, including incentive pays, and wondered if it would be better to pay off an existing mortgage, approximately $60,000, just refinanced last month at 3.5 percent and a 15-year term? Or would it be better to max out the Roth TSP and set up another deferred account or IRA of some sort? My wife makes about $55,000 per year. A. It’s impossible to say what’s best for you without the…
Q. I retired from the Defense Department on Dec. 31, 2009, and received my final paycheck in 2010. I purchased a traditional IRA for 2010, and claimed an income tax deduction for that IRA. I just received notice from the Internal Revenue Service that they have disallowed the deduction stating that according to my W-2 from DoD, I was covered by an employer retirement plan in 2010. My agency payroll office tells me an amount of approximately $13 was added to my retirement account based on my final paycheck, which I received in 2010. The IRS suggested I have my agency…
Q. When I retire under FERS, can I get all of my Thrift Savings Plan monies, Social Security and my annuity? Can I roll over my TSP monies without paying 30 percent of the total to the Internal Revenue Service? If so, what amount of tax-deferred monies, once rolled over, can I take out monthly without a penalty or have to pay taxes? A. Mike: Once you retire, you may withdraw your TSP money. If you retire during or after the calendar year in which you reach age 55, your TSP withdrawals will be exempt from the early withdrawal penalty.…
Q. I have a Thrift Savings Plan loan that I would like to pay off and was wondering if there was a way to do it by transferring funds from my personal IRA. First, would a direct transfer work at all? Is there any way to designate that transfer to count against the loan? Second, since I should pay back the loan with post-tax funds, if I do a rollover from a Roth IRA, can I then put it in the TSP as a loan payment? Because I’m under 59½, will I get the early withdrawal penalty, even though I…
Q. I received a packet from my previous employer that I needed to cash out or roll over my funds to an IRA or another retirement fund. I’m 48 years old. Where can I put this fund without having to pay a broker or a financial adviser fee? Is there a fund that I can roll this into without upfront fees or an annual fee? A. The best place for this money is your Thrift Savings Plan account. You can use form TSP-60 to request the transfer.
Q. I just retired at 55 from the Postal Service. Can I roll over a traditional IRA into my Thrift Savings Plan? A. Yes, as long as the IRA contains no after-tax money.
Q. I left federal service (did not retire) at age 57. If I opt for a lump-sum payout, will I just be taxed 20 percent? I keep seeing the additional 10 percent tax before age 59½. Also, are there additional taxes to be paid if I do not roll over into a traditional IRA? A. You will be exempt from the early withdrawal penalty since you separated from service during or after the calendar year in which you reached age 55. If you do not roll your withdrawal over, it will be taxed as ordinary income when you file your tax return for…