Q: I am 53 years old, and I was a U.S. Postal Service employee with 20 years of service under the Federal Employees Retirement System. I took disability retirement from the USPS in March after suffering injuries in Iraq as a reservist. If I take a full withdrawal from my Thrift Savings Plan account, will I pay a penalty to TSP, and at what percentage? How much will I have to pay in taxes? Will the USPS match my TSP balance? And how long must my money stay in a TSP account before I can make a full withdrawal without…
Browsing: penalties
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 have an IRA from a previous employer that is not performing too well. The Thrift Savings Plan seems to be rebounding rather nicely over the past several months. Should I move the IRA into the TSP? Can this be done without any penalties? A: The TSP is a better investment environment than any retail IRA account I have ever seen, and I generally recommend that eligible investors move their IRA money into the TSP whenever possible. You are eligible if your IRA account contains no after-tax money — money from non-deductible contributions. Check with your IRA custodian to…