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…
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Q. I have a general purpose loan and am planning to retire soon. If I choose not to repay the loan and take a tax distribution, will I still be entitled to make one partial withdrawal after retirement? Or will the unpaid balance of the loan be considered my one-time partial withdrawal? A. The unpaid loan does not count as your partial withdrawal.
Q. My understanding is if I withdraw using a loan from my Thrift Savings Plan (say a residential loan) shortly before I retire and under 59½ years old, and then I retire or turn 59½, I get a 10 percent tax penalty because the loan was taken when I wasn’t eligible for a withdrawal without penalty. It seems a little contradictory because I could pay off the outstanding amount and then take an unpenalized withdrawal after retirement or 59½. Am I reading this rule correctly? A. No. If your unrepaid loan balance is declared a taxable distribution, it is counted as…
Q. I want to help my daughter reduce her $120,000 graduate student loan, which she will repay at 6.5 percent interest when she finishes next year. I am 58 years old, a foreign service officer, and planning to work until I am 65. Given that Thrift Savings Plan general loans are at 1.2 percent interest, I am considering asking for a $50,000 loan to help my kid jump-start payments. In your opinion, would this be wise? A. Wise is not really the issue here. It’s certainly generous. But, is it affordable? That’s really the question.
Q. Can a TSP residential loan be taken out to pay off a mortgage on a primary residence? A. No.
Q. I am going on 72, working for the Postal Service, contributing to the Thrift Savings Plan and paying off a loan. Do I have to start the age-based withdrawal? If I do, how do I contribute and withdraw at the same time? My health is good, and I don’t feel like quitting at this time. A. You don’t have begin taking Required Minimum Distributions from your TSP account until after you’ve retired.
Q. At the beginning of a pay period, an employee’s military orders begin. But in the middle of the pay period, it will be the 60th day after paying off a Thrift Savings Plan loan. If the employee wants to initiate a new TSP loan, what should the employee do? The orders are for several months. A. The employee cannot take a loan from his/her civilian account if the employee is in nonpay status with respect to his/her civilian employment while performing military service. However, the employee may be eligible to request a TSP loan from his/her uniformed services account.
Q. I retired from active duty in December 2011. I accepted an appointment to a government service position in October 2011 and established a FERS Thrift Savings Plan account. I did not move any of my TSP account balance accumulated during my time on active duty into my FERS TSP account, so I currently have two accounts. Am I eligible to take out a loan against the TSP account balance still residing in my [previously] active-duty account? If not, can I transfer all or part of my [previously] active-duty account into my FERS TSP account with the goal of taking…
Q. I just separated from the military and have an outstanding loan. I recently mailed in the “intent not to repay” form. How long will it take for the Thrift Savings Plan to claim a taxable distribution and close out the loan? Also, if the entire sum of the loan was accrued in a tax-free combat zone, will they still tax the remaining balance? A. I checked with the TSP, and it should take one to two weeks for TSP to declare a taxable distribution once it receives an “intent not to repay” notice. Only the outstanding loan principal and…
Q. I am 61½ years old. I want to pay my mortgage off. I am losing my contract job and need to lower my debt. I have saved up all but $30,000. If I withdraw that from my Thrift Savings Plan, how much in federal taxes will I have to pay? Would it be better to get a personal loan? A. Your TSP withdrawal will be added to your income for the year and taxed at your marginal tax rate for the year. You’ll need to prepare a pro-forma tax return to estimate the amount you’ll owe. It’s impossible to say,…