Will I be able?
L1: Will I be able?My question is: I have $331000.00 in my TSP (401K)account that I plan to rollover into a 72t plan. I am retiring as a Federal Law Enforcement Office (LEO)at age 52 1/2. I will be receiving a retirement from the Feds and I am wanting to supplement my retirement using the 72t plan. I am wanting to draw $1300.00 each month until I turn 59 1/2. Will I be able to do this without having to pay the 10% penalty? I understand I will still have to pay normal income taxes on the amount I receive each month. Date of Birth 1961. First Payment 02/2014.2013-09-12 17:28, By: yanmar1610d, IP: [22.214.171.124]
L2: Will I be able?Do you qualify under the Public Safety Officer provision ? If so, you do not have to set up a SEPP 72-T, and can take withdrawals at age 50 without the 10% early distribution penalty.2013-09-12 18:06, By: dlzallestaxes, IP: [126.96.36.199]
L3: Will I be able?Yes, I am retiring under Public Safety Officer Provision (Federal Law Enforcement Officer).
Thanks for the Answer.2013-09-12 18:27, By: yanmar1610d, IP: [188.8.131.52]
L4: Will I be able?Do not roll it over to an IRA. If you do, then you will be subject to the age 59 1/2 early distribution provisions.2013-09-12 18:33, By: dlzallestaxes, IP: [184.108.40.206]
L5: Will I be able?I am rolling it over into a Edward Jones 72t account.2013-09-12 18:57, By: yanmar1610d, IP: [220.127.116.11]
L6: Will I be able?I googled “EARLY RETIREMENT DISTRIBUTION PENALTY FOR FEDERAL LAW ENFORCEMENT OFFICER”.
It came up with an excellent article at FEDERALTIMES.COM in ASK THE EXPERTS: MONEY MATTERS by Mike Miles.
Apparently there are many nuances in this area.
1. See IRS PUB.575, page 33 (where the IRS lists an exception from the 10% penalty on withdrawals from TSP for qualified public safety employees), and pub 721, pages 17-18 (where a law enforcement officer is listed as a qualified public safety employee).
2. But then a Q/A states that the “Qualified Public Safety Officer/Employee” applies only to defined benefit pension plans, but not to defined contribution retirement plans like TSP (Thrift Savings Plans).
3. Another Q/A states that LEO status does not exempt you.
4. Have you researched at www.tsp.gov ?
5. You are allowed to take one partial withdrawal from the TSP in your lifetime.
6. You can apparently make a series of monthly payments from a TSP without setting up a 72-T plan, and can change the amount of fixed monthly payments once a year in January. But another Q/A says you have to set up a SEPP.
I suggest that you hire a professional who understands all of these nuances. Although I am a tax specialist, I am not familiar with all of the above, and would suggest that anyone who called me to seek out someone who specializes in this area.2013-09-12 19:42, By: dlzallestaxes, IP: [18.104.22.168]
L4: Will I be able?Careful my friend. My agency contacted the IRS. They stated Federal PSO’s do not qualify for the age 50 exemption on two points. First, the Pension Protection Act (PPA) specifically lists state and local in the definition of PSO’s for the age 50 exemption, not federal. Second, the TSP is a defined contribution plan. The Age 50 PSO exemption is for definedbenefit plans.
I have a copy of the IRS response. Looks like 72T is the way to go, or leave your money in TSP and take life expectancy withdrawals.
2013-09-20 20:53, By: Kaufmanrider, IP: [22.214.171.124]
L5: Will I be able?See my nuance answers # 2 & # 3 above.2013-09-20 22:29, By: dlzallestaxes, IP: [126.96.36.199]
L2: Will I be able?Yan, With respect to part of your inital question on the amount you would hope to draw, you need to try the SEPP calculator to see what it will yield. I did not have your birth Month and day, so I used 9/1/1961, and current SEPP Max rate allowed, with your $331K, and amortization method for 2/1/2014 first payment date yielded about $14,000 per year, which is less than the $15,600 you desire per year. If Max INT rates goes up, it mayget to what you desire for Feb 2014 first payment. As long as your payments (each year) meet the requirements of a SEPP, and you have it well documented, I see no problem in you being able to avoid the 10% penalty for early withdrawal. You will need to file form 5329 with your tax return to show why no penalty, if the custodian does not use code 02 on the 1099-R.2013-09-12 20:10, By: Ken, IP: [188.8.131.52]
L3: Will I be able?Thanks for all the comments.2013-09-13 12:23, By: yanmar1610d, IP: [184.108.40.206]