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Federal Employees Benefits Q &A

Do you have questions about your federal employee CSRS or FERS pension/annuity or federal employee retirement planning? Concerns about your Thrift Savings Plan (TSP) account or what about federal employee pay and leave issues?

Ask your question here.

The Q&A forum is moderated by Ed Zurndorfer -- an expert on federal employee benefits -- and a Certified Financial Planner, chartered life underwriter and chartered financial consultant in Maryland.

Zurndorfer is also the author of several federal employee benefits guides published by Federal Employees News Digest.

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Note: FederalSoup.com has attempted to compile information that is as accurate and current as possible for federal employees. Federal policies, laws, regulations, statistics and addresses continually change. Therefore, no warranties are made as to the accuracy or completeness of the information presented in this column. If additional clarification or information is needed, it is suggested that competent and professional assistance be sought. Mr. Zurndorfer does not moderate other forums on FederalSoup and will not reply to general FederalSoup inquiries submitted in this Q&A forum.

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#1 Posted : Wednesday, March 26, 2008 1:31:26 AM(UTC)

Rank: Newbie

Groups: Registered
Joined: 3/26/2008(UTC)
Posts: 1

Ed, You conducted a pre-retirement course in my area in February. I found your presentation very helpful. I had one lingering question I was hoping you could answer:

I am in Federal Law Enforcement (Special Provision Employee) and will be eligible to retire in January 09 on my 50th birthday with 24 years government service and 22 years in a covered law enforcement position. I want to know how I can begin withdrawing limited funds from my TSP on a regular basis without penalty once I retire. I would like to set up a withdrawal plan to take approximately 4% of my account balance per year. I know I can take a fixed lifetime annuity which does not interest me. I know I can take payments based on life expectancy (which is an option) but that will not provide me the initial fixed amount per month that I want in the early years of distribution. I wanted to know if there were other options such as: fixed monthly payments (below) or options available through the IRS 72(t) exemption and in particular the annuity factor or amortization methods? By using these methods (if available) would I be required to roll my TSP account balance over to a traditional IRA or can I leave the funds in the TSP? If I select any of these options how long do I lock myself into and can I make any changes to how I withdraw funds annually prior to age 59 ½?

The TSP Fact Sheet information (below) confused me as they seem to be contrary to what I am reading in IRS literature. The key may be that the items referenced below only refer to those persons taking distributions after 59 ½ but don’t state that.

Thanks for your assistance in this matter.

Reference Material from TSP Fact Sheet:

What are the general rules for making a full withdrawal?

You may withdraw your account by using any one or any combination of these withdrawal options. For example, you might withdraw your entire account in monthly payments, or you might take half of your account as a single payment and half of your account as an annuity.
If you choose to withdraw your account in a single payment, your entire balance is paid at one time. You can have the TSP transfer all or part of any single payment to a traditional IRA or eligible employer plan. Payments to you can be deposited directly into your checking or savings account by means of EFT.
If you choose to withdraw your account in monthly payments, you must also choose whether you want the TSP to compute your payments based on the IRS life expectancy table or whether you would like to receive a specific dollar amount each month. (See "Can I change my withdrawal after I receive it?".) If you choose to receive a specific dollar amount each month, you may be able to transfer all or part of your payments to an IRA or other eligible employer plan. This will depend on the number of payments you are expecting to receive. For additional information, read the tax notice "Important Tax Information About Payments From Your TSP Account.")

Can I change my withdrawal after I receive it?

Once your withdrawal has been processed, you cannot return it or change the withdrawal option. However, if you elected to receive all or a portion of your account in a series of monthly payments, you can change your election to a final single payment or change where your payments are being sent. Effective each January, you can change the fixed dollar amount you are receiving. You can also make a one-time change from TSP-computed monthly payments based on life expectancy to a fixed dollar amount.
Ed Zurndorfer  
#2 Posted : Sunday, September 14, 2008 7:13:58 PM(UTC)
Ed Zurndorfer

Rank: Senior Member

Groups: Registered
Joined: 9/10/2001(UTC)
Posts: 4,414

In order to receive a higher monthly payment when receiving payments from your TSP account before you are age 55, you should rollover your TSP account to a traditional IRA and use one of IRS' approved "72(t)" methods for receiving penalty-free payments. These methods are the amortization or the annuitization method. For more information, check with a tax professional.
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