Q. I’ll be retiring early next year (2012) and would like to learn if (or how) a Thrift Savings Plan withdrawal taken at retirement that is used to purchase or build a primary residence would be subject to federal tax. A. It will be taxed as ordinary income.
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Q. I am a Federal Employees Retirement System employee, and I am confused regarding which of my three retirement components are subject to federal and state taxes. Basic annuity? Thrift Savings Plan annuity? Social Security supplement? A. Distributions from your TSP account are considered taxable income.
Q: I am looking at retirement in about 18 months. I am in CSRS offset. I’ll have 31.5 years total service and about 1,500 unused hours of sick leave. I left the government for about 10 years from June 1982 to February 1991 and took my retirement out. I owe about $25,000, but not real sure. I can repay it out of IRA and 401(k) accounts, I just don’t want to pay taxes on the withdrawals, since I cannot roll the IRA from the original withdrawal back into the CSRS retirement. Any thoughts? A: Rules are rules. To the extent…
Q: Mike Miles answered a recent question about Thrift Savings Plan withdrawal by saying that the person making the withdrawal pays the taxes and penalties when filing a tax return, but that the TSP will withhold 20 percent for future liabilities. I’m not sure what that means: If the taxes and penalties are paid when we complete our tax returns, why does TSP withhold 20 percent, and what happens to that money? What could be a future liability? Do we ever get the 20 percent back? A: The TSP withholding is mandatory; the 20 percent will be deposited with the…
Q: I am retired military, and I want to withdraw the full amount of my Thrift Savings Plan account. Will I pay the tax and penalty immediately, or will I pay when I file my 2011 taxes? I have about $14,000 in my TSP. In other words, will I recieve the full amount or will it be taxed first? A: You won’t actually be required to pay the tax and penalty until you file your return, but the TSP will withhold 20 percent from your payment as a deposit against future liability. You may not reduce this withholding, but you…
Q: I am 75 and still working under the Federal Employees Retirement System. I have two tax shelter plans. One of them is with my Thrift Savings Plan account, and I learned from the TSP website that I do not have to take a required minimum distribution from them until I retire. My other plan started when I worked for Georgia Tech, but is now managed by a brokerage firm. My question is: Must I take an RMD from the plan managed by the brokerage firm if I am still working? I don’t understand why I should have to take such…
Q: I joined the federal government more than three years ago. Can I roll over money from my Individual Retirement Account into my Thrift Savings Plan account? A: Yes, as long as long as your IRA doesn’t contain basis — that is, money that’s already been taxed.
Q: I am a 59-year-old Federal Employees Retirement System employee and have 35 years of service. I am considering retirement next year after reaching my 36th year. I would like to know my options concerning the Thrift Savings Plan. The questions I have deal with both leaving the funds in the TSP and moving them to another form of retirement account, which would not result in an immediate tax liability. Could you please explain the options available and what the benefits are to each? A: You may leave your money in the TSP or roll the balance over to any…
Q: I am an employee (Federal Employees Retirement System) at a BRAC-ed installation. Sometime around September 2011, I will be fired. At 56 years old — the age at which I’ll have 29 years’ service — I can retire. I would like to cash in my Thrift Savings Plan (approximately $156,000), collect on my rolled-over leave ($54,000), collect on 50 percent of my sick leave ($17,000), collect my $25,000 and pay off all my debt. I’ll live on my pension and offset. Can I take out all my TSP funds, and what is the tax bite if I should do…
Q: I would like to know what my options are for withdrawing from my Thrift Savings Plan account? What would be the tax consequences for those options? I am a Federal Employees Retirement System retiree approaching the age of 70. A: I suggest that you first review the information available at www.tsp.gov including: The booklet at www.tsp.gov/forms/tspbk02.pdf and the tax notice at www.tsp.gov/forms/octax92-32.pdf. If, after you’ve studied these, you have any specific questions, I’ll be happy to answer them. — Mike Miles