TSP and Combat Zone Pay

I contributed to the Thrift Savings Plan from tax exempt combat zone pay. What will happen when I begin withdrawing money from the TSP?

FedSmith.com author John GrobeBy Categories Federal Employee Pay News, Q&A Leave a comment
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Q.  I contributed to the Thrift Savings Plan from tax exempt combat zone pay. What will happen when I begin withdrawing money from the TSP?

A.  If you contributed to your TSP from your tax exempt combat zone pay, the portion of each TSP withdrawal that is based on that contribution will be free from income tax when you make a withdrawal. That amount will be noted on the Form 1099 you receive from the TSP.

If you chose a TSP annuity, the portion of your annuity that was based on your tax exempt contributions would be spread out over your life expectancy.

If you withdrew monies early from the TSP, the 10% early withdrawal penalty would not apply to the portion of the distribution that represented the tax exempt contributions.

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About the Author

John Grobe is President of Federal Career Experts, a firm that provides pre-retirement training and seminars to a wide variety of federal agencies. FCE’s instructors are all retired federal retirement specialists who educate class participants on the ins and outs of federal retirement and benefits; there is never an attempt to influence participants to invest a certain way, or to purchase any financial products. John and FCE specialize in retirement for special category employees, such as law enforcement officers.

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