Q. I’m nearing retirement and have a Thrift Savings Plan loan. If I decide not to pay off the loan but to pay the taxes on the taxable distribution, am I still eligible for the one-time partial withdrawal after I retire? A. A declared taxable distribution does not violate the TSP’s eligibility requirements for taking a partial withdrawal after separating from service.
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Q. How long after I retire do I have to repay my loan? Is there time to take a partial payment from the Thrift Savings Plan at retirement to pay the loan? A. You have 90 days following your separation to repay the loan. It doesn’t make sense to take a partial withdrawal to repay the loan, since any unpaid balance will be declared a taxable distribution when the deadline is reached but won’t count against your once-in-a-lifetime limit on partial withdrawals.
Q. I have not worked since fall 2011. I’m on leave without pay with the Postal Service. Currently on disability retirement approved by Social Security and the Postal Service. The Office of Personnel Management has until November to finalize the disability retirement. On Sept. 23, I default on my Thrift Savings Plan personal loan ($5,300). I am entitled to agency retirement pay of $1,645 per month but cannot be paid until OPM acts. Social Security is roughly ¼ pay, and I cannot realistically pay the catch-up amount and the two monthly loan payments for at least two months. At that…
Q. I plan on retiring in September 2014. I bought a house in November 2012 and need some remodeling done. If I borrow from my Thrift Savings Plan ($10,000), will I have to pay back the full amount borrowed prior to retiring? A. You’ll have to pay the money back shortly after you retire or it will be declared a taxable distribution.
Q. I’m a recent federal retiree and was attempting to rollover my Thrift Savings Plan account to an IRA. I filled out the proper forms and had the financial institution where I’m rolling over the funds complete its section (Page 4), as well. I faxed the TSP withdrawal form as instructed. After a couple of weeks, I received a check (minus federal taxes) in the mail. I called the TSP hotline and they said that they received all of the pages of my form except for Page 4. They said that Page 4 was missing but the pages following Page 4 were…
Q. I am an air traffic controller who is retiring in two months at age 48. I have an outstanding Thrift Savings Plan loan for about $9,000. What happens if I don’t pay this off before I retire? Do I pay the 10 percent penalty, along with it being shown as income? Does this affect my monthly withdrawal from TSP using the 72(t) rule? Also, can I take a one-time partial lump-sum withdrawal and pay the 10 percent penalty without it affecting my monthly withdrawal? A. If you don’t repay the loan within the grace period after you retire, it will…
Q. What would be the tax rate on a TSP taxable distribution due to an unpaid loan stemming from a transfer of function/work? My human resources office did not make appropriate change in time and left me with a balance amount (lump sum) I could not afford to pay back in order to continue loan payment. Now I’ll have to pay taxes on a taxable distribution of $11,680. Just trying to figure out how much I’ll owe. I’m hoping my refund will cover the taxes due. A. The distribution will be included on your tax return as ordinary income, and…
Q. My husband has 10 years of Air Force service and is in the process of negotiating to take a federal position. Is it possible to use a 401(k) rollover to buy back his service? I am thinking not, since a rollover is only allowable to an IRA or other “qualified plan.” We certainly can take a direct taxable distribution of a portion of that 401(k) plan and use that money to buy back, but he wondered if it can be done with the rollover. A. No.
Q. I am 59 and am going to retire next year. I am in CSRS. I have a loan on my Thrift Savings Plan, which, if I retire next year, won’t be completely repaid. Do I have to repay it, since it’s my money and I can withdraw all of my money from TSP when I retire? A. No. If you don’t repay it, the outstanding balance will be declared a distribution and will be reported to you as taxable income. Since you are retiring after the year in which you reached age 55, there will be no early withdrawal…
Q. On June 26, I took out a $22,000 loan against my 401(k) plan for major home improvements. That equaled up to $376 per month taken out of my paycheck to repay this loan. Then, Aug. 1, my hours were temporarily reduced until the end of 2012 to 30 hours per week, which amounts to an additional $620 deducted from my pay monthly. This puts a serious hardship on my ability to pay my monthly obligations. Is there a way to legally stop payments to my 401(k) repayment, seeing as I had no idea my hours would be reduced, whereby affecting my ability…