Browsing: penalty

Q. I have 27½ years in the Postal Service and I am 52½ years of age. If an early-out comes in the next few months, will I get a penalty for leaving? Do I get my special retirement supplement, or do I have to wait for that? Also, do I get to take my Thrift Savings Plan now, or do I wait for that? A. Mike: The early-out has no effect on the Internal Revenue Service early withdrawal penalty. You will be subject to the penalty until you reach age 59½ unless you qualify for one of the exceptions listed…

Q. I am an air traffic controller who is retiring in two months at age 48. I have an outstanding Thrift Savings Plan loan for about $9,000. What happens if I don’t pay this off before I retire? Do I pay the 10 percent penalty, along with it being shown as income? Does this affect my monthly withdrawal from TSP using the 72(t) rule?  Also, can I take a one-time partial lump-sum withdrawal and pay the 10 percent penalty without it affecting my monthly withdrawal? A. If you don’t repay the loan within the grace period after you retire, it will…

Q. I am 65 years old and will collect my first Social Security retirement check this month. I have been employed by the federal government for the past nine years; therefore, I have been enrolled in the Thrift Savings Program. If I retired today, my TSP benefit would be approximately $400 a month. Will my Social Security or TSP benefit be penalized because I am drawing benefits from both accounts? A. It is possible that the taxes you owe on your SS benefits could affected by your annual income, including TSP distributions. See www.irs.gov/uac/Are-Your-Social-Security-Benefits-Taxable%3F for more info.

Q. I appreciated your Feb. 4 article concerning the advantages of the Thrift Savings Plan vs. more costly private products. I am unclear, however, about the options (and their advisability) when it comes time to retire from federal service. Recognizing that rules allow distribution without penalty at 59½ and require some distribution from any IRA at 70, is continuation in the TSP an option which would allow the retiree to access the account as desired, or must the TSP account be moved to a private instrument? A. I have written about this topic on more than one occasion. You may…

Q. I’m trying to understand why the Thrift Savings Plan calculator that allows “monthly” or “lifetime” projections automatically defaults to the required minimum distribution amount at age 70½ when my (expected) withdrawals are more than the Internal Revenue Service RMD limit. Which takes precedence: the IRS RMD which produces a significantly smaller amount of TSP payout, or the amount I wish to take out? A. You must take at least the RMD amount each year to avoid a substantial penalty.

Q. I am 47 years old and retired from the uniformed services almost three years ago. I work as a federal civilian. I have two Thrift Savings Plan accounts and two questions. 1. Can I roll my uniformed service account balance into my federal civilian account balance? If yes, how? If no … 2. If I don’t reinvest in another tax-deferred retirement account, and elect to withdraw 100 percent of my uniformed service balance, what penalties will I pay (if any) in addition to taxes? A. You may combine your uniformed services TSP account into your civilian TSP account. Use Form TSP-65, which…

Q. In our divorce settlement, my wife wants to have her marital share available to spend on housing. What would the total penalty amount on her portion be? A. If there’s no exception for a court order, an early withdrawal will generate a penalty equal to 10 percent of the earnings withdrawn. Consult a tax accountant for advice.

Q. I am a CSRS employee planning on retiring at age 55. I also have been paying into the Thrift Savings Program.  Will I be able to withdraw from TSP when I retire at age 55 without penalty? A. Yes.

Q. My husband and I inherited IRAs from my mother when she passed away at age 86. Why must I take required minimum distributions from these IRAs when I am only 59 years old and my husband is 46? A. Because the rules for beneficiary IRAs say you do. Or, you could not and pay the 50 percent penalty instead.

Q. I involuntary separated from federal employment due to a reduction in force at age 53. I receive a small FERS monthly annuity. I am now 59½, and I would like to withdraw $25,000 from my Thrift Savings Plan, which I have never touched. I will have to pay taxes, but will this withdrawal be subject to the 10 percent penalty at my age? A. No.

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