I just came upon your channel by chance and I really enjoyed this first video I have seen. I retired from Federal service on May 31st and am enjoying myself immensely. I feel lucky that I only had a three month wait (September 1st) to receive my full FERS pension annuity and Special Retirement Supplement. I had to navigate the retirement process myself since we had no on site HR to help. Channels such as this are invaluable to those planning to retire. Well done. Great presentation.
Excellent information to know, as I'll be retiring at the end of the year from the Federal Service. Your channel has been very helpful in my planning. Thank You!
Thank you so much for making these. I'm going to watch all of these. I've just never been able to understand any of this and I know it's so important. Just starting a new job and I want to get it right. Thanks for doing it.
Wow, this is invaluable information! The instructions were so clear that I didn't mind watching the video twice to fully grasp it. After retiring on December 31, 2022, from Federal Service under the FERS system, I found your channel to be an immensely helpful resource in my retirement planning. Thank you ever so much!
This was the best video I’ve seen that explains withdrawal and taxes. I have thought about using the 4% rule, but I think I will go with the life expectancy. I never heard the tax deduction for life expectancy is at the married rate with three dependents again this is the best video I’ve seen. Thank you so much, I still have three years before retirement but I’ve been leaning towards life expectancy withdraws for a while now I look forward to more. You’ve helped so much.
Thanks for the comment! The default tax withholding setting for life expectancy was recently changed from married with three dependents to single with zero exemptions. This change was made to increase tax withholdings for retirees and help prevent them from owing taxes. If you prefer a different withholding amount, you can adjust your tax withholdings. Here is a newer video that further explains the installment options and updated tax measures: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-6aTMTj-0-8Q.html
Please note - NY State DOES NOT tax TSP withdrawals for FERS federal employees. I have all 3 tax advisories issued by the NY State Tax Court on this subject if anyone is interested. Thanks.
New York State doesn’t tax the TSP as you say, because it considers it part of the FERS retirement and NYS doesn’t tax Federal pensions. However, if you roll money out of the TSP into an IRA then take distributions from this, you are only exempt on the first $20,000 you take out. Anything more than that gets taxed from an IRA.
Been looking for this info in a concise presentation for awhile now as I recently due some unexpected needs will have to tap my TSP for a single distribution. The tax ramifications had me worried but the his info helped allay my fear. Thinking I should now maybe have them hold out a bit more than 20% to make sure I don’t get any tax time surprises! If it’s not enough at least it reduce the total tax and if it’s a bit too much I should get refunded. Thanks for the good information!
Great question! The form is not directly downloadable from the website. To initiate a distribution, log into your TSP account or call the TSP Thriftline.
Just the information I was needing. Thank you!! - I retired in 2017 and just received notice from TSP about my RMD to begin in March when I turn 73, They sent me calculations on how much my monthly payments would be based on my life expectancy. Can I request a change of the monthly payments calculated to another set amount?
Thanks for your information! I see on my statements a life time monthly payment which comes from MetLife . Do you know what happens to my account balance if I select the life annuity but then die? Is there a survivor benefit?
The monthly payment you see on your statement is the TSP Annuity option through MetLife. If you choose this option, your account balance moves to MetLife and is no longer part of your TSP account. You can pick a joint life annuity that includes a survivor benefit of 100% or 50%. However, this choice will reduce your monthly payment. Normally, when either you or your survivor passes away, the money stays with MetLife. But, you have the option to add features that can pay out to a selected beneficiary. Check out my video about the TSP Annuity for more info: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-qPAkqMXBFm0.html
Great information. I have a question; I’m 62 and just retired from 37 yrs of federal service 6 months ago. Roughly would I pay 20% federal taxes on a withdrawal of $16,000 from my TSP account?
If you take a withdrawal of $16,000, the TSP would withhold $3,200 for federal taxes so your net deposit amount would be $12,800. If you want the net amount to be $16,000, then you would have to take a withdrawal of $20,000.
I plan to withdraw an entire traditional 401 TSP account when I retire in 5 years and use the distribution to put down for a new house, but am concerned about a big tax bracket % impact when taking out the large balance at once. So, you, on the video, mentioned that if I convert traditional TSP to TSP Roth now (saying small partial for next 5 years to close out the traditional side) and make a first contribution to Roth, therefore, in 5 years later I could take out the whole Roth balance once to use for the down payment since the first contribution in 1st year is the indication of meeting the qualification for no penalty and tax free. Is that correct?
If you're 59 1/2 or older, you can make withdrawals or transfers from your TSP account while you are still employed. Once you retire, there is no age requirement to transfer money. Your strategy would limit the big tax bracket impact, but each conversion has its own five-year period.
Just so I’m understanding, I’m eligible for retirement at 48, plain on going at 50. I contribute 9% of my own to Roth and I understand you can’t touch this until 59 1/2 without penalty. That being said, can I choose to only withdraw from traditional until I turn 59 1/2? Leaving Roth untouched and not penalized.
I retired from federal law enforcement at age 52 with over a full 20 years under the law enforcement FERS program. As I understood it, I was exempt from the 10% tax fee for the lump TSP transfer and just had to pay the federal taxes. Is that still correct?
You will be exempt from the 10% early withdrawal penalty (tax) that is usually assessed on distributions before age 59.5. You'll still have to pay federal income tax and possibly state tax on the withdrawal.
Great video! Just so I’m clear, let’s say I want to withdraw $450K from my tsp at age 62. That distribution will have a 20% tax withholding off the top. Then at the end of the year my 1099 gross distribution will be $450K. I’m assuming my FERS will be filed using a 1040. At the end of the year I may have to pay taxes or receive a refund depending on where I fall in the bracket. Is this a correct assumption?
Yes, that is essentially correct. Just one slight point of clarification, you'll receive a separate 1099-R for your TSP distribution and FERS pension around the end of January. You'll report and file the income from both on Form 1040 during tax season. Everything else is basically in line with your statement.
Question...are TSP withdrawals after being taxed at least 20% by the fed reported as income during the next tax filing season once the 1099-R is received?
@@TheMoneyBriefing So, just to be clear. I plan on retiring (FERS) in December 2023. I also anticipate taking a one time (full) withdrawal of my TSP. Both my FERS pension and TSP withdrawal will not take effect until early 2024. Does that mean that taxes on my TSP will not be due until the following year's tax filing season (2025)? Is that correct? Thank you.
@@hectormarcayda8608 When you take the withdrawal in 2024, the TSP will automatically withhold 20% for federal taxes. In the following year when you file taxes for your 2024 income, it will be reported that taxes were already withheld. Based on your total taxable income for 2024, you may or may not owe any more federal taxes. Please note, the TSP does not withhold state or local taxes so you may owe those taxes after you file.
So…..can you withdraw money without doing the hardship withdrawal and at anytime/age? Cause that loan thing is crazy and not finna borrow my own money and to pay tax on it back for it to grow.
If you're under 59 1/2 and still employed in the government, the two ways that you can tap into your TSP money is either through a loan or hardship withdrawal. Once you turn 59 1/2, you can also do an age based distribution.
After you retire from the federal government, you can transfer the money to a new company plan if you continue working after federal service or you transfer the money to an IRA account held at a financial institution. NTEU is a membership union that advocates for employees and retirees but they don't hold and invest retirement assets.
greetings , great video ! I am 53 years old ( not member of special force / military) with 20 years of creditable service at VA . My two question : 1) dose life expectancy installment withdrawal option starting at age of 53( separating at age 53 from government ) cause 10% early withdrawal penalty or it is exempt ? 2) if I would choose fix dollar instalment plan option more > 10 years, would I get 10% early withdrawal penalty or I am exempt ? ( TSP bulletin says people choosing Life expectancy base instalment at ANY age ( < 55 ) when separating from government WILL not get penalized 10 % penalty ( early withdrawal ) I did not see this for FIX dollar withdrawal > 10 years, though in TSP site )
To avoid the 10% early withdrawal penalty at age 53, you can establish a Substantially Equal Periodic Payment (SEPP) over your life expectancy once you separate from service. With a SEPP, there are generally 3 ways that you can take your distributions. There are some restrictions and guidelines that you must follow. You should review how a SEPP works and if you have additional questions, please email us at ask@fedwayfinancial.com and we’ll be happy to help.
If you're still working for the federal government, you can keep adding money to your TSP even if you withdraw or transfer all of the money after you turn 59 1/2. After you leave the government, you must maintain at least $200 in your TSP to keep it open. Once you leave, you can't make additional contributions but you can rollover funds from an IRA or retirement plan to your TSP.
You are taxed on your gross distribution amount. As an example, if you take a $10,000 withdrawal, the $2,000 (20%) that is withheld for federal taxes represents part of your taxable income. When you file your taxes, you will not pay an additional federal tax on the 20% withheld unless your effective tax rate exceeds your withholding percentage.
The percentage is based on your life expectancy and it increases each you that you age. For example, at age 73 the percentage is 3.77% and at age 75 the percentage is 4.07%. The amount and percentage can be calculated by using the IRS Uniform Lifetime Table.
If you take an all cash distribution, the TSP will withhold 20% for taxes. You may also be penalized 10% if you're under 59 1/2. You can also transfer the money to an IRA without any immediate tax consequence.
Soo since I’m still active duty , been in 7 years, I’m 26, i can’t just withdraw all the money from my TSP account ? I’m okay with with them taking 20% to 30%. I already took out a loan 2 years ago. I might get a EV soo i can use the tax credit to cover all the taxes.
Based on your age, you're not eligible to withdraw the money unless you qualify for a financial hardship. Once you separate from service, you can access the money. You can also have up to 2 loans outstanding at one time while working.
Great video, very helpful. I just recently retired and I want to pull all of my money out of my TSP I’m 40 but I already have a hardship loan to account for I know that will be deducted and added with my taxes on top of what I pull out. My question is how long does it take tsp to roll over from active to retired? Because right now my only option is another hardship to pull all of my funds out in just want to do it the right way.
Are withdrawals from traditional TSP (for fed retirees receiving CSRS annuity) exempt from NY taxes? Is the exemption only $20,000 per year or is this $20,000 exemption only for withdrawals from money rolled over from traditional TSP to traditional IRA. And if it is only allowed from traditional IRAs must the rollover be done before TSP RMD distributions?
Based on New York state tax rules, the Thrift Savings Plan is considered part of the federal pension plan. Therefore, distributions from your Traditional TSP would qualify for the tax exemption rules for federal, New York state, and local pension income. The $20,000 exclusion is an additional tax rule that applies to other retirement income, like an IRA.
@@TheMoneyBriefing HI Jerel, Thank you for your response. However, Does a federal pension always qualify for full government pension and annuity income exclusion? The attached Question and Answer sheet, from the NYS Department of Taxation and Finance indicates TSP withdrawals for CSRS recipients are NY tax exempt, but only up to $20,000, but fully NY tax exempt for FERS recipients. NY Department of Taxation and Finance, Common questions and answers about pension subtraction adjustments: CSRS: (Civil Service Retirement System) - if the federal employee was hired before January 1, 1984, income from their Thrift Savings Plan is considered supplemental for which the exclusion is subject to the age and amount limitation to the extent it is included in their FAGI, not to exceed $20,000. FERS: (Federal Employee Retirement System) - if a federal employee was hired on or after January 1, 1984, income from their Thrift Savings Plan is fully excludable to the extent included in FAGI.
@@TheMoneyBriefing HI Jerel, Thank you for your response. However, does a federal pension always qualify for full government pension and annuity income exclusion? The attached Question and Answer sheet, from the NYS Department of Taxation and Finance indicates TSP withdrawals for CSRS recipients are NY tax exempt up to $20,000, but fully NY tax exempt for FERS recipients: NY Department of Taxation and Finance, Common questions and answers about pension subtraction adjustments: CSRS: (Civil Service Retirement System) - if the federal employee was hired before January 1, 1984, income from their Thrift Savings Plan is considered supplemental for which the exclusion is subject to the age and amount limitation to the extent it is included in their FAGI, not to exceed $20,000. FERS: (Federal Employee Retirement System) - if a federal employee was hired on or after January 1, 1984, income from their Thrift Savings Plan is fully excludable to the extent included in FAGI, to the extent included in FAGI.
@@TheMoneyBriefing HI Jerel, Thank you for your response. The attached Question and Answer sheet, from the NYS Department of Taxation and Finance indicates TSP withdrawals for CSRS recipients are NY TAX EXEMPT ONLY UP to $20,000, but FULLY NY tax exempt ONLY for FERS recipients: Do you have any documentation from the State of NY that clearly shows TSP withdrawals are fully tax exempt for CSRS annuitants? If so, please share it I hope you are right! Thank you! NY Department of Taxation and Finance, Common questions and answers about pension subtraction adjustments: CSRS: (Civil Service Retirement System) - if the federal employee was hired before January 1, 1984, income from their Thrift Savings Plan is considered supplemental for which the exclusion is subject to the age and amount limitation to the extent it is included in their FAGI, not to exceed $20,000. FERS: (Federal Employee Retirement System) - if a federal employee was hired on or after January 1, 1984, income from their Thrift Savings Plan is fully excludable to the extent included in FAGI, to the extent included in FAGI.
@@TheMoneyBriefing Just google :NY Department of Taxation and Finance, Common questions and answers about pension subtraction adjustments, page 2: CSRS: (Civil Service Retirement System) - if the federal employee was hired before January 1, 1984, income from their Thrift Savings Plan is considered supplemental for which the exclusion is subject to the age and amount limitation to the extent it is included in their FAGI, not to exceed $20,000. FERS: (Federal Employee Retirement System) - if a federal employee was hired on or after January 1, 1984, income from their Thrift Savings Plan is fully excludable to the extent included in FAGI, to the extent included in FAGI.
If you leave the government after age 55 and take a TSP withdrawal, your distribution is exempt from NYS taxes. I'm not sure about the NYS rules for early hardship withdrawals or early withdrawals if you leave service before 55.
This may not be related to withdrawing options but close. I got word from TSP that I must take RMDs at 72. So I researched TSP a lot and no where does it ever state that TSP is like a 401k or similar to a IRA. It always state TSP is a Government Saving Account with tax saving while employees are working. The only reason I questioned the RMDs was that, if I do have to take RMDs, could I claim a QCD to reduce the taxes. TSP web site has nothing about this or give me the option to have my RMD mailed to an organization eligible to receive tax-deductible contributions. The options I have is (1) start withdrawing the RMD or more, (2) do nothing and have them mail the RMD it to my home. When I found that RU-vid had knowledgeable people about TSP, I thought this may be my source for assistance. Can anyone help?
Thanks for your question! You can’t make a QCD directly from an employer-sponsored plan such as a TSP, 401(K) or 457. You must transfer the money from your TSP to an IRA, and then use the IRA to make the QCD. Also, if you’re not 72 yet, the RMD starting age was recently increased to 73 for pre-tax and tax deductible accounts. You can directly transfer all or part of your RMD to a charity up to $100,000 per year to help reduce your taxable income.
