Q. I retired early with more than 20 years of service due to work-related injuries. I am 50. I have more than $314,000 in my Thrift Savings Plan. I want to withdraw either a partial or full amount but also want to avoid the 10 percent penalty tax. If I transfer my money to an IRA, then make a withdrawal, will I be able to avoid the penalty? What are my options? A. You should consult IRS Publication 590 for the exceptions to the early withdrawal penalty that apply to IRAs. See Page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf for…
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Q. If I want to withdraw all of my Thrift Savings Plan account at 59½, do I have to retire? Or can I keep working? A. You may take one age-based in-service withdrawal from your TSP account while you are still working.
Q. Could you please explain the difference between the traditional Thrift Savings Plan and Roth TSP? I was told that the traditional TSP is taxed when you begin withdrawing it at retirement. And that only the government’s contribution to your retirement (let’s say they matched my 5 percent) is the only portion that is taxable when withdrawn; my contribution is not taxed at withdrawal. Is this correct? A. Basically, you fund the Traditional TSP with pretax deferrals from your paycheck and pay tax on money as it is distributed to you later. You fund the Roth TSP with post-tax deferrals…
Q. I sent TSP Form 77 to the Thrift Savings Plan requesting that funds be withdrawn from my account and sent to a non-TSP IRA. When I returned from overseas, I discovered that a mistake had been made on the forms and instead of all of the requested funds going to the IRA, TSP sent 50 percent of the funds to the IRA and 50 percent to me less a hefty amount to the Internal Revenue Service. I asked for a reversal of the action, but the Federal Retirement Thrift Investment Board turned me down, saying that TSP had not…
Q. In your Dec. 16 column, you suggest leaving money in the Thrift Savings Plan as long as possible. I like the suggestion to withdraw only the required minimum distribution when the time comes. I am confused how this is done since, unlike the mutual fund companies, the TSP doesn’t seem to have an option of partial withdrawals. A. You’ll have to initiate monthly withdrawals to meet the requirement. Since you can’t go from automatic withdrawals based on your life expectancy to fixed monthly withdrawals, you’ll retain more flexibility by sticking to fixed monthly withdrawals. If your monthly withdrawals fall short of…
Q. I’m 66 and contributed money to a Roth IRA. I would like to withdraw all of it. Do I have any tax consequences? A. Not as long as you’ve had the Roth IRA for at least five years. The rules are a little tricky for figuring this out, so you should consult Internal Revenue Service Publication 590 and/or a tax adviser before proceeding.
Q. I am on federal disability retirement. If I make more than 80 percent of my high-3, I lose my disability retirement. If I withdraw from my Thrift Savings Plan, does it count as earned income, and will it make my disability pension stop? A. No.
Q. I have separated from federal service with an existing Thrift Savings Plan loan. My intent is to take a lump-sum withdrawal and take a taxable distribution versus paying off the loan. In the end, will I end up paying more or less tax if I were to pay off the loan versus taxable distribution? A. It’s impossible to say what you’ll pay “in the end,” but if you repay the loan on time, your tax on the money owed will be zero until it is ultimately withdrawn.
Q. I am 52 (FERS employee with 29 years of service including military buyback) planning on retiring at age 59-60. I have $400,000 in my Thrift Savings Plan account. I’m not sure that I’ll need TSP right away but want to have the option. My coworkers insist I can’t withdraw before 65, but I can’t find anything that indicates such a restriction. Are there any restrictions other than the 59½ rule that would affect me? A. No.
Q. I am a CSRS employee. I have decided to take the Voluntary Separation Incentive Payment and should be off the rolls by March 31. I am told that I can put in 10 percent of my basic total federal wages (could be in excess of $200,000) into the Voluntary Contribution Program and I should withdraw all of it when I retire. I am also told that I can deposit this withdrawn VCP money into a Roth IRA, which is the main reason I want to do this. Are my assumptions true? If it is, how can I open a…