Q. I want to retire at age 58 and begin tapping my Thrift Savings Plan. I will have 15 years of federal service time. What can I do to avoid paying any penalty? A. Since you are retiring during or after the calendar year in which you reach age 55, your subsequent TSP withdrawals will not be subject to penalty.
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Q. I am the CSRS retiree who turned 70 years old in July. My email was posted Aug. 19. Boy, you have a way of really making a person feel small and stupid. I chose to start withdrawing my money so I wouldn’t have to be concerned about the 70½ deadline. These withdrawals were based on my life expectancy, and I knowingly started withdrawing my money a little ahead of time. I have not concluded that I am not receiving any gain from the G Fund with the Thrift Savings Plan. I wondered why I was taking such a significant…
Q. I’ve been making substantial contributions in the Roth TSP and plan to do so until I retire. I have a large sum in my non-Roth TSP account. I’ve read that when I begin to take TSP withdrawals in retirement, I cannot specify whether they come from the Roth or non-Roth TSP. I read that the withdrawals will be taken pro-rata from both forms of the TSP. Is that correct? If I want my Roth TSP to grow for as long as possible, is there anything I can do to preserve it other than keep delaying all TSP withdrawals until age…
Q. I realize that the withdrawal of Roth earnings have different implications. But if I understand this correctly, the withdrawal of Roth IRA contributions can be done at any time without triggering a taxable event or penalty. Is the same true for the withdrawal of contributions from the Roth TSP? A. You may withdraw Roth funds without tax or penalty if you’ve had a Roth IRA for at least five years (starting from Jan. 1 of the year you first contributed to a Roth IRA) and you are at least age 59½. The same rule applies to your Roth TSP…
Q. If I withdraw my Thrift Savings Plan earlier than age 59, I will be penalized 20 percent at the time of withdrawal and have to pay 10 percent in taxes at the end of the year. What if I transfer the money into a traditional IRA and withdraw it a year later? Will I save on taxes? A. Your premise is incorrect. Rolling over the money to an IRA doesn’t help you avoid taxes or penalties on your withdrawals. It may work against you, depending upon when you retire.
Q. What are the negatives and positives as far as changing a Thrift Savings Plan account to a Roth IRA? A. The negatives are that you have to pay taxes now and that you’ll likely incur higher investment costs, greater investment risk, or both in a Roth IRA. The positives might include an advantage if your tax rate rises sufficiently between the time you convert and the time you ultimately withdraw your money from the Roth IRA.
Q. I have a two-part question. I am a federal firefighter and, as of December, I will have 25 years and 10 months on the job and I am 50 years old. What is the salary they will be basing my retirement on: base pay or actual pay? When can I collect my Thrift Savings Plan? I would like to receive checks like a retirement. A. Mike: You may begin withdrawing your TSP balance, or use it to buy an immediate annuity, as soon as you are separated from service. Reg: Your annuity will be calculated using your basic pay.…
Q. I plan to start withdrawing a specific amount each month from my Thrift Savings Plan account next year. Will my withdrawals be taxed by my state of North Carolina? A. From the North Carolina Department of Revenue website: “If you received retirement benefits as a former employee of the State of North Carolina or any of its local governments or as a former employee of the federal government and you did not have five years of service with the government as of August 12, 1989, you may deduct the amount included in federal adjusted gross income or $4,000, whichever…
Q. 1. I am retired at 52. If I take a life expectancy withdrawal through the Thrift Savings Plan from now until I reach 59½, can I then roll over the balance of my account to a privately held traditional TSP such as Vanguard? Or does taking the life expectancy withdrawal through the TSP commit me to them for life? 2. If I receive life expectancy withdrawals now through the TSP, can I still take a partial withdrawal (amount of my choosing) when I am 59½ without the 10 percent penalty? 3. If I roll over my entire TSP account now to a…
Q. I will retire at the end of this month. Already set the Social Security deal and retirement paperwork. If I retire now (tax year 2013) and ask for a big chunk of my Thrift Saving Plan in February (tax year 2014), will it affect my Social Security payment (as a windfall or any other way)? A. Not directly, but it can affect the cost of Medicare Part B. You should consult a tax adviser (who will prepare your return) before you proceed, if you’re not sure.