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Retirement Planning


Whether you are close to federal employee retirement or just starting out in your career, this is the place to share ideas with your federal colleagues on creating a secure financial foundation.


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DGP  
#1 Posted : Sunday, March 1, 2020 2:59:00 AM(UTC)
DGP

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Location: Europe

Hello Ed,

We (in Vicenza Italy)hope you are doing well.

My wife has 4.5 years of GS employment. Becuase of my military service, she lost her federal job, that was 13 years ago.

We continue to fund her Traditional TSP with IRA rollovers. We are now nearing our early retirement.
My question is: my wife only has 4.5 years of tGS service. She left federal government before she reached her retirement in FERS. Now that she is 56, can she start withdrawing her TSP without a 10% penalty?

Also, the Vicenza federal workers would like to invite you here... How can I move that forward?

Thank you,
David
Roger.D  
#2 Posted : Sunday, March 1, 2020 10:23:44 AM(UTC)
Roger.D

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I don't believe Ed Zurndorfer reads/post in this forum. Only in the "Federal Employees Benefits Q&A" forum.

I was not able to find an answer on the TSP website. But I found this:

https://www.fedweek.com/...withdrawal-penalty-myth/

TheRealOrange  
#3 Posted : Tuesday, March 3, 2020 4:51:30 AM(UTC)
TheRealOrange

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Originally Posted by: DGP Go to Quoted Post
My wife has 4.5 years of GS employment. Becuase of my military service, she lost her federal job, that was 13 years ago.

We continue to fund her Traditional TSP with IRA rollovers. We are now nearing our early retirement. My question is: my wife only has 4.5 years of tGS service. She left federal government before she reached her retirement in FERS. Now that she is 56, can she start withdrawing her TSP without a 10% penalty?

The TSP rules provide that "if you receive a TSP distribution before you reach age 59 ½, in addition to the regular income tax, you may have to pay an early withdrawal penalty tax equal to 10% of any taxable portion of the distribution not transferred or rolled over." But, there are exceptions. The additional 10% tax generally does not apply to payments that are:

• paid after you separate from service during or after the year you reach age 55 (or the year you reach age 50 if you are a public safety employee as defined in section 72(t)(10)(B)(ii) of the Internal Revenue Code);
• annuity payments;
• automatic enrollment refunds;
• made as a result of total and permanent disability;
• made because of death;
• made from a beneficiary participant account;
• made in a year you have deductible medical expenses that exceed 10% of your adjusted gross income (7.5% if you or your spouse is 65 or over);
• ordered by a domestic relations court; or
• paid as substantially equal payments over your life expectancy.

So, it seems to me that you will need to see if you can fit your wife's distributions into one of the exceptions. Otherwise, the 10% penalty will apply.
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