Browsing: separating

TSP loan

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Q. The Air Force is going through a drawdown because of sequestration. If a person has a current Thrift Savings Plan loan and is involuntary retired earlier than the minimum 20 years for military service, what are their TSP loan options? Are they required to immediately pay this back, or will they still have the option to pay the loan back over time? Also, how does joining the civil service affect the TSP account? A. You will be required to repay any outstanding loan balance within 90 days of separation, or the unpaid balance will be declared a taxable distribution.

TSP withdrawal payment options

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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…

Taxable distribution vs. one-time partial withdrawal

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Q. I’m nearing retirement and have a Thrift Savings Plan loan. If I decide not to pay off the loan but to pay the taxes on the taxable distribution, am I still eligible for the one-time partial withdrawal after I retire? A. A declared taxable distribution does not violate the TSP’s eligibility requirements for taking a partial withdrawal after separating from service.

Withdrawing from TSP without penalty

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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…

TSP loan repayment

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Q. How long after I retire do I have to repay my loan? Is there time to take a partial payment from the Thrift Savings Plan at retirement to pay the loan? A. You have 90 days following your separation to repay the loan. It doesn’t make sense to take a partial withdrawal to repay the loan, since any unpaid balance will be declared a taxable distribution when the deadline is reached but won’t count against your once-in-a-lifetime limit on partial withdrawals.

VERA/VSIP, annuity, TSP withdrawals and SRS

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Q. How will Voluntary Early Retirement Authority/Voluntary Separation Incentive Pay affect my retirement benefits (annuity supplement, pension and Thrift Savings Plan withdrawals)? I am a Defense Department civilian, age 58, with 21 years of service under FERS. A. Mike: You will have access to your TSP account, under the usual rules, without penalty following your separation. Reg: Your annuity would be computed under the standard formula: .01 x your high-3 x your years and full months of service. There wouldn’t be any age penalty because you were retiring before age 62. And, since you have already reached your minimum retirement age,…

Terminal cancer and TSP early withdrawal

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Q. I will most likely be medically separated from the military next year after 25 years of service.  I have bone cancer that is incurable but manageable — 50 percent life expectancy is 10 years. I am 47, so if I live 10 years, I would be 57 and still ineligible to withdrawal my Thrift Savings Plan. Are there exceptions for terminal disease that allow you to withdraw early without penalty? A. The list of available exemptions appears on Page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.

Workers' comp and TSP withdrawal

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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…

Directed reassignment

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Q. I am 46 with 22 years of service, and have been told that I will soon receive a letter of directed reassignment to a job in my same grade far outside my commuting area. When the letter arrives, if I should decline to move to the new position, what are my options for drawing retirement? How about insurance? Severance pay? What about my 401(k) in the Thrift Savings Plan? My performance ratings are not an issue. A. Mike: Your circumstances will not affect the usual rules that apply to your TSP account. As long as you remain employed, you will be…

TSP upon separation

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Q. I have five years at the Veterans Affairs Department and 4½ years at the Transportation Security Administration and am about to be suspended/terminated (FERS). Being non-military, can I leave my Thrift Savings Plan and FERS with the government without penalty or roll over to Vanguard since I am not 56? I have more work time in the private sector than with the government. A. You may maintain and manage your TSP account for as long as you live. You may also roll your TSP money over to an IRA and close your account after you separate, without penalty, regardless…

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