Don't Cash Out Your TSP!

0:00Think twice before cashing out your TSP. This is a money minute from in charge education foundation and militarymoney.com. If you leave the military before retirement, you must decide what to do with your TSP nest egg. You can leave the money in the plan, roll the money over to your new employer's plan, roll the money over into an IRA, or take the cash value of your account. It may be tempting to choose that last option, but cashing out before you turn age 59 and a half will cost you. If you do not transfer your money into an IRA or a new employer's plan within 60 days of receiving it, your current employer is required to withhold 20% of your account balance to prepay federal taxes. If you keep the money, you must pay federal income tax on your entire withdrawal. In addition, you may also owe state tax on your distribution. Plus, the IRS will consider your payout an early distribution, meaning you could owe a 10% early withdrawal penalty. When all is said and done, you may end up with a little more than half your original TSP savings. If you really need the money, you may be better off borrowing from your TSP account. This money minute is made possible by in charge debt solutions. Visit us online at www.inscharge.org