Military Retirement TSP Questions

[Jmacloud]

1. Assuming there is a balance remaining to be paid on a TSP home purchase loan when a member's official retirement date hits, what happens next? I've tried to piece this together and as near as I can tell, the member would have to include the non-repaid balance in his income tax statement and pay taxes on it that way? Is this correct? Is there a penalty?

2. Military members who transition to federal service - is this exactly the same as a post-retirement IRA rollover? Or is there a difference? I'm assuming I can roll my TSP from the military into a federal TSP account. Should I?

[kteeple]

No idea on the first part but for the second part you do not have to roll it over. You can keep both a civilian and a military TSP. You can manage them both thru the TSP website.

[m.eddy]

The question I would ask with regards to the first part is "Are you retiring or seperating?" This would make a difference. Jab or Ski, correct me if I am wrong but the payments (allotments) should be able to come out of your retirement check. Seperating would be a different animal. You would have to pay the loan in full or it would have to be declared and become a taxable distribution. But there is no prepayment penalty. Hope this helps.

[BigMike]

The question I would ask with regards to the first part is "Are you retiring or seperating?" This would make a difference. Jab or Ski, correct me if I am wrong but the payments (allotments) should be able to come out of your retirement check. Seperating would be a different animal. You would have to pay the loan in full or it would have to be declared and become a taxable distribution. But there is no prepayment penalty. Hope this helps.

I believe any outstanding amount will be treated as a disbursement and as such will have to be decleared on your taxes in the year it occurs. The only penalty would be if you are not 59 1/2 before the event. If you have not reached 59 1/2 then there would be a 10% early withdrawl penalty.

Once retired or separated the TSP program makes no provisions for continued payment of contributions or loans. They probably could but they don't and won't!