Browsing: tax

FERS disability

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Q. I fell under FERS disability. What percentage will I be hit with on a full withdrawal of my TSP? I am under the 55 age limit. A. The withholding for federal taxes will be 20 percent. The tax and early withdrawal penalty you actually owe on the withdrawal will be calculated when you file your tax return for the year. Unless you qualify for one of the exceptions listed on the left side of Page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf, in addition to income taxes, your withdrawal will be subject to the 10 percent early withdrawal penalty.

Annual Leave payout

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Q. I am a federal employee and will retire Jan. 3. I will have about 400 hours of Annual Leave for a cash payout. Am I allowed to request that this monetary amount be directly rolled into an eligible 401K plan and not have any taxes taken out? If I take the cash payout, can I predetermine the tax percentage based on my calculations or does the government tax at the maximum rate? A. You may not direct the payout into an IRA or 401k plan. Taxes will be withheld according to the W-4 you have on file with your…

Revocable trust

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Q. I am federal employee and plan to retire in about six months or a year. I want to leave the money in TSP when I retire, but want to include TSP in a living revocable trust. I read online that it is not a good idea because the IRS considers that as a lump-sum transfer and I will be taxed at almost 35 percent. But when I consulted an estate-planning attorney, I was told that I can include TSP in the trust, and it does not make any difference in how I withdraw the money. I am confused. Please…

TSP and VERA

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Q. Can I withdraw from my TSP if I accept a VERA with 30 years of service and my age is 47, or is there a penalty? If so, how much? A. If you separate from service before the calendar year in which you reach age 55, you will be subject to an IRS 10 percent early withdrawal penalty unless you qualify for one of the exceptions listed on Page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.

59 1/2

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Q. I plan on retiring just after I turn 59 with 30 years as a federal employee. Do I have to wait until 59½ to take anything out from my Thrift Savings Plan account either via partial lump sum or monthly amounts to avoid the 10 percent tax penalty? A. Not if you wait until you’ve retired to request the withdrawal. You will be exempt from the early withdrawal penalty.

RMD

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Q. I am a FERS employee who turned 71 in September. I plan to retire in January 2015. When do I need to start taking my required minimum distribution? A. Under the current rules, and these circumstances, your first RMD, for tax year 2015, will be due by April 1, 2016.

RMD and still working at 70 1/2

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Q. I am 70 years old and still employed by the federal government. When I am 70½, I understand I must take a required minimum distribution from my traditional IRA/401s, but not clear if this applies to my Thrift Savings Plan account. Can you please tell me what the rules are for those who are 70 and over but still working for the government insofar as taking a required distribution from my TSP account? Can I wait until I retire from government? A. You may wait until you retire. You may also be able to transfer your IRA/401k balances into the TSP…

TSP distribution

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Q. My husband is retiring from the Postal Service on Nov. 1. We have $850,000 in tax-free municipal funds (all AAA rated and paying over 5 percent), and another $200,000 in natural gas and oil limited partnerships and some preferred stocks in energy companies that I recently inherited. I would like to live on the interest from these investments, leaving the principal alone. My husband is 62 and we want to wait until he is 66 to receive his Social Security payments. (Waiting until 70 is out of the question as both parents were stricken with Alzheimer’s disease at an early age.…

TSP withdrawal penalty?

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Q. I will be a 56-year-old CSRS employee with 33 years in service and 2,842 hours of sick leave. Since I contributed to the Thrift Savings Plan and plan on doing a one-time complete withdrawal, will I incur a large tax penalty? A. If you retire at age 56, you will not be subject to penalty for withdrawing money from your TSP account.

TSP partial withdrawal after tax distribution declared

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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.

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