Q. I contribute to the Thrift Savings Plan where you don’t invest the money. What is the difference between the Roth IRA and TSP? Would you recommend that I look into the Roth IRA? A. The TSP is funded with pretax money, but when withdrawn, the money is taxed as ordinary income. The Roth TSP is funded with after-tax money, but the money is exempt from income when it is withdrawn. Everyone who is eligible to participate should consider the costs and benefits of both options, although it can be difficult or impossible to know in advance that one or…
Browsing: withdrawal
Q. I’m 64 years old, planning to retire at the end of March, and after I retire, I’m hoping to take $20,000 off the top of my Thrift Savings Plan. Am I able to leave the rest for a later date? And what options do I have when I decide to tap into the remaining balance? Do I have to take the rest out in a lump sum or can I take it out in increments, like an annuity? A. You may take one lump-sum withdrawal. After that, your only option is a full withdrawal, either as a lump sum…
Q. I plan on retiring in August at age 60 with over 37 years of service. I am under CSRS. I also contribute to the Thrift Savings Plan and started a Roth in December. Given that the feds are planning to “borrow” from the G Fund, would I be wiser to convert all TSP monies to Roth or withdraw and put into another IRA? A. I don’t think so. The law requires that the G Fund be made whole.
Q. We were discussing Thrift Savings Plan withdrawals at work, and one guy asked why the withdrawals weren’t taxed at two different rates. Part should be ordinary income, and part should be taxed at the capital gains rate. Is this correct? Is that how it is taxed at tax time? A. TSP withdrawals are considered to be entirely ordinary income for tax purposes.
Q. I am taking the Voluntary Early Retirement Authority from the Postal Service and am trying to decide how to withdraw funds from my Thrift Savings Plan. I have about $300,000 in my account and have a mortgage of $150,000 with about 10 years until payoff. Should I take a lump sum and pay off my mortgage and keep the remaining money in TSP? Or should I just start withdrawing approximately $2,000 monthly to cover mortgage payments? I am afraid if I pay off my mortgage, the tax hit would be to great. A. I suggest that, as long as your mortgage…
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 have about $260,000 in my Thrift Savings Plan account and just turned 67. We don’t need extra income right now. I’ve read your advice to others concerning leaving the money in TSP and withdrawing the minimum to satisfy requirements. Assuming nothing changes between now and then, is that still your recommendation concerning the requirement for withdrawal at 70½? Second, must I take action beyond designating order of precedence to ensure the appropriate next of kin receive the account balance when I die? A. My recommendation is simple: Delay drawing down your TSP for as long as possible. It’s not a matter of…
Q. I am a military member retiring in January 2014. I will have approximately $57,000 invested in my Thrift Savings Plan account when I retire. If I decide to withdraw my account in one lump sum, how much will I pay in taxes? I’ve heard that I would be taxed up to 30 percent of my balance at time of withdrawal, which would leave me with about $39,900 after taxes. Is this accurate? A. Your check will be reduced by 20 percent for mandatory federal tax withholding. This is just a deposit against your federal tax liability, however, which you won’t determine…
Q. I turned 62 in December. I am 100 percent disabled from combat wounds. I worked federally for a while and saved $102,000 in a G Fund under FERS. I’m about to start losing my home as my wife will have to retire this year. Without her income, we won’t be able to afford the mortgage (but no credit card or other debt on the house.) What percentage at age 62 does a 100 percent disabled vet have to pay when withdrawing savings in full? I think it’s stating 20 percent, but that doesn’t seem reasonable. Am I reading it wrong? I want…