What is a Thrift Savings Plan?

 A thrift savings plan for federal employees and members of the armed services is like a 401K plan, rather than an IRA. It is funded with pre-tax contributions by the participant out of their paycheck.

Participants can borrow against their account balances and the repayments are deducted from their pay checks.

If over age 59.5, participants can withdrawal their balances while in service without penalty. If under age 59.5, withdrawals can only be made for financial hardship.

Upon separation from the service, the participant can roll over the account balance or withdraw the balance in installments or in a lump sum. If under age 59.5, the withdrawals upon separation of service will result in a penalty if not rolled over. Another alternative upon separation of service is to keep the money in the thrift savings plan until age 70.5, at which time the entire account has to be withdrawn or rolled over.

This is all pre-tax money and will be subject to income taxes when the account is liquidated.

For more information on your tax return and charitable donations, visit www.irs.gov. Please contact our office at (941) 906-1231 for an initial consultation if you need legal advice.