Withdraw?

[recliner]

When you retire from gov. and wish to take a partial withdraw are you taxed on this also is there any penalties by taking a partial withdraw?

 

[Wheels]

When you retire from gov. and wish to take a partial withdraw are you taxed on this also is there any penalties by taking a partial withdraw?

Yes, you are taxed. And you may owe the 10% penalty unless you are 59 and a 1/2 or if you retired in the year you turned 55 (or later) or if you meet a few other less common criteria (like you are on disability or maybe your medical bills exceed 7% of your adjusted gross income).

Hope this helps,

Dave
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[recliner]

Yes, you are taxed. And you may owe the 10% penalty unless you are 59 and a 1/2 or if you retired in the year you turned 55 (or later) or if you meet a few other less common criteria (like you are on disability or maybe your medical bills exceed 7% of your adjusted gross income).

Hope this helps,

Dave
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Hey Wheels thanks. You say 10% penalty if retire in the year 55 or later. I will be 57. Will I get penalize?
Also Wheels is it smarter to take full withdraw and put it in something else or just let it stay until I am 70yrs.

 

[Wheels]

Hey Wheels thanks. You say 10% penalty if retire in the year 55 or later. I will be 57. Will I get penalize?
Also Wheels is it smarter to take full withdraw and put it in something else or just let it stay until I am 70yrs.

I think you are saying that you will be 57 when you retire. As I understand it, you will have full access to your funds without paying the 10% penalty. As to whether you should leave it in TSP or move it somewhere else, that is a question that should spark a debate. My personal opinion is leave it in TSP, because you have unlimited free changes between funds and overall very low fees. However there are also some compelling reasons why you might want to move it. I'll let some others chime in here.

Dave
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[tsptalk]

I was under the impression that you can't withdraw from your TSP account funds without penalty, or traditional IRA, until you are 59 1/2 UNLESS you take it out in "substantially" equal payments - i.e. an anuuity. Has that changed?

 

[Wheels]

I was under the impression that you can't withdraw from your TSP account funds without penalty, or traditional IRA, until you are 59 1/2 UNLESS you take it out in "substantially" equal payments - i.e. an anuuity. Has that changed?

There is no change. It has always been this way.

From the TSP website (note the first exception - I've discussed this before here. Apparently you are not paying close enough attention. There may be quizzes from now on):



Additional 10% penalty tax if you are under age 59½.

If you receive a TSP distribution before you reach age
59½, in addition to the regular income tax, you may
have to pay an early withdrawal penalty tax equal to
10% of any portion of the distribution not transferred
or rolled over. 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;
• Made because you are totally and permanently
disabled;*
• Paid as substantially equal payments over your
life expectancy;
• Annuity payments;
• Ordered by a domestic relations court;
• Made because of death; or
• Made in a year you have deductible medical expenses
that exceed 7.5% of your adjusted gross
income.*

Dave
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[FundSurfer]

• Paid after you separate from service during or
after the year you reach age 55;

Hmmm.... I thought there was also a requirement that you were elligible to retire from federal government.

As to the leave it in or take it out, that depends on a lot of things. Is this your sole retirement? (If not, you may want to leave it to take advantage of the low fees Wheels talked about as part of a balanced portfolio.)

What would you do with the money otherwise? If you would be putting it into mutual funds similar to those available in TSP they'd probably be better off left there. If you are looking for other types of investments not available through TSP then that would be a good reason to move the money.

 

[Wheels]

• Paid after you separate from service during or
after the year you reach age 55;

Note the wording. You don't actually have to turn 55. It's a subtle difference but a significant one if your birthday is in the latter months of the year. If you turn 55 in October or November etc, then you can retire in January of that same year and get your TSP without penalty.

Dave
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