Q. I am reading TSP-775 (6-2013) concerning important tax information about TSP withdrawals. First paragraph (Deadline for withdrawing your TSP Account) states that “By April 1 of the year following the year you become age 70.5 and are separated from Federal Service, the TSP requires that you withdraw your entire account balance in a single payment.” It goes on to give options about monthly payments, life annuities. This leaves me perplexed. I thought I only needed to withdraw the required minimum distribution after becoming age 70½. Also, I thought if I have other IRAs, I could take the RMD from those and leave…
Browsing: lump-sum
Q. I am 61 years old and have a Thrift Savings Plan loan of $24,000 and over $60,000 remaining in my TSP account. I applied for a Voluntary Early Retirement Authority/Voluntary Separation Incentive Pay at my human resources office awaiting approval. What happens to my TSP loan and to my remaining balance in my account if I request a full withdrawal when my retirement is approved? Does the remaining balance of my TSP loan gets paid up from my remaining balance and incur penalty for the full withdrawal? A. If you don’t repay your loan within 90 days of the…
Q. I am an air traffic controller who will be forced to retire in May 2016 when I turn 56 with 28½ years of service time. If I retire anytime between Jan. 1, 2015 (the year I turn 55) and May 2016, will I be able to take out a lump sum and monthly payments from my Thrift Savings Plan without the 10 percent tax penalty? Do I have to follow the life expectancy requirement for receiving monthly payments, or am I free to set the payment amount as I wish and adjust it once a year? A. Since you…
Q. I have to retire in 18 months. I plan on taking a lump sum and monthly allotment from my Thrift Savings Plan at retirement. I understand both of these will be taxed at 20 percent. I am thinking of taking a TSP loan for the amount I had planned on requesting as my lump sum prior to my retirement date, with the understanding that I won’t have the time to pay it back in full and that the amount I don’t pay back will be considered disbursed income. My reasoning is that having the funds now will allow me to…
Q. I’m a Defense Department firefighter (special category). At what can I withdraw my Thrift Savings Plan without incurring any penalties? A. If you’ll settle for specific monthly payments, you can withdraw it any time after you separate from service without penalty. If you want a lump sum or monthly payments that don’t fall within the limits imposed by Internal Revenue Code section 72(t), then you’ll have to wait until you reach age 59½ unless you separate from federal service during or after the calendar year in which you reach age 55. In the latter case, any withdrawal you make…
Q. If the lump-sum payment is considered earned income for tax purposes but is not eligible to Thrift Savings Plan deferral nor does it serve as the base for automatic agency contributions, wouldn’t it make better sense not to cash in the leave? Rather, wouldn’t it be more lucrative to continue working, take the earned vacation over the year, collect matching funds for TSP, matching funds for health insurance, and on top of that, continue to accrue more annual leave, more sick leave, and enjoy the vacation time off? I understand no supervisor/manager would approve a single vacation of 5+…
Q. I am a contractor in between jobs and would like to withdraw my Thrift Savings Plan. If there are any owed monies to the government, will that be taken from my TSP? How much tax will be taken from me if I do a lump sum? And is there a difference in taxes if I do a monthly payment? Lastly, is there a hardship exemption rule if unemployed? I am retired from active duty (20 years) and 42 years old. A. There is an “it depends” at the beginning of the answer to each of your questions and I can’t…
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. I am a 50-year-old 6(c). I am eligible to retire on an immediate unreduced annuity this year and plan to do so. I plan to eventually access my Thrift Savings Plan funds, and I understand that I am able to do 72(t)-type withdrawals and avoid early withdrawal penalties. But I’m not interested in 72(t) systematic payments. I also know I could roll over the account to an IRA, but that is not my desired intention. Since I am retiring at age 50, what is the first date that I could begin to access my TSP via lump sum or monthly withdrawals without…
Q. Are federal taxes taken out of the lump-sum payment for annual leave? And If I withdraw all of my Thrift Savings Plan upon retirement, will the tax be taken out before I receive the payment? A. Mike: A lump-sum distribution from your TSP will be subject to 20 percent minimum federal tax withholding. Reg: Yes, federal taxes will be taken out of your lump-sum payment for unused annual leave.