Accessing your account upon retirement

fireman1953

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I feel sure this question has been asked before, but without trolling through the hundreds of posts, I'll ask it again. I have looked through the numerous booklets on the TSP website and cannot find a concrete answer. If you reach full retirement age of MRA & 30 and decide to go, but are not yet 59 1/2, can you access your TSP without paying early withdrawal penalty? There is a big discussion among some of my co-workers about this topic. They seem to insist that it is the same as a regular IRA or 401K. I went to a TSP seminar at our convention and I'm almost 100% sure the speaker said you can withdraw your money without penalty beginning in the year you turn 55. So who's right?
 
I am surprised that you will accept an answer form someone on this site without investigating for yourself. There are a lot of knowledgeable people on this site, but suppose their answer is wrong? You should contact your Human Resources retirment expert and get an answer from them and then check it out for yourself to make sure.
 
I am surprised that you will accept an answer form someone on this site without investigating for yourself. There are a lot of knowledgeable people on this site, but suppose their answer is wrong? You should contact your Human Resources retirment expert and get an answer from them and then check it out for yourself to make sure.

First off, I haven't accepted anything anyone has told me. I am merely raising a question looking for additional input. Second, as I stated in my original post, I have investigated it myself by poring over the numerous booklets concerning taxes and withdrawing money from the TSP and have been unable to get a clear and concise answer. And lastly, I do not have easy access to HR as there is one place (shared services) covering the whole company. I'm only trying to get info for others. As I will be over 59 1/2 when I retire, it will be a moot point for me. As I have found from past experience on other issues, even people in HR don't always have the right answers either.
 
[h=3]This applies to all 401k's incl TSP. I think you are confusing the MRA guidelines (MRA & 30...in your ex 55) with the min age for no penalty withdrwal's from a 401K (per atch/IRS 59 1/2). They are not the same.

401k Withdrawal[/h]401k's were designed to help us put away money for retirement and not make a withdrawal on it until then. If you want to make a 401k withdrawal before retirement then you will most likely be penalized for it. You can make withdrawals without penalties beginning at age 59 1/2 and must make withdrawals before reaching age 70 1/2.
There are two different types of withdrawals: financial hardship withdrawal and no-penalty withdrawal.

Financial hardship withdrawals must meet some criteria. First of all the withdrawal must be necessary due to an urgent and significant financial need (a new car is not included!). Second, you can't get the money from anywhere else and the money must be for the amount you need (not for more). Finally, you must have already taken out all loans available to you through your 401k plan. If these criteria are met, then there are a few circumstances for which you can make a financial hardship 401k withdrawal:
  • To purchase a primary residence
  • To prevent foreclosure on your primary residence or eviction from your home
  • To pay tuition for yourself, your spouse, or a dependent
  • To pay medical expenses that cannot be reimbursed for you
The downside to financial hardship 401k withdrawals is that you must pay taxes on the money you withdraw and it is subject to a 10% penalty. If you take out $20,000, for example, you will be penalized $2000 and you'll have to pay taxes around $5000 (depending on your tax bracket). This would only leave you with around $13,000. That stinks.

No penalty 401k withdrawals are still taxable but don't have the 10% penalty attached. These can include:
  • Pemanent disability
  • Medical debts that exceed 7.5% of your adjusted gross income
  • A court orders you to give the money to a divorced spouse or a dependent
  • You stop working (layed off, quit, early retirement) the year you turn 55 or later
  • You stop working and begin taking out regular payments based on a schedule that will make equal payments for the rest of your expected life; these must last for 5 years or until you turn 59 1/2, whichever is longer
The above summarizes the federal 401k withdrawal rules, but you are also subject to your employer's withdrawal rules. Your employer does not have to allow you any financial hardship withdrawals, although many do.
 
At our convention this year, there will be a seminar specifically on TSP, given by someone who works in the TSP office. I attended this a few years ago and I'm almost 100% sure that she stated that the rules for the TSP are different from the standard 401K. I plan to attend again just to be sure and will ask this specific question. When they created FERS, they set up the system so you can retire with full benefits, if you meet the criteria, before you turn 59 1/2. And as the TSP is part of your retirement, it would make sense to make this exception. But I will find out for sure in August.
 
I feel sure this question has been asked before, but without trolling through the hundreds of posts, I'll ask it again. I have looked through the numerous booklets on the TSP website and cannot find a concrete answer. If you reach full retirement age of MRA & 30 and decide to go, but are not yet 59 1/2, can you access your TSP without paying early withdrawal penalty? There is a big discussion among some of my co-workers about this topic. They seem to insist that it is the same as a regular IRA or 401K. I went to a TSP seminar at our convention and I'm almost 100% sure the speaker said you can withdraw your money without penalty beginning in the year you turn 55. So who's right?
I am retired and have done all the research. I am now withdrawing funds while leaving it in tsp. I works just like a 401k or Ira. The only way to do it before 59.5 is to use IRS 72t rules. Basically withdrawals based on life expectancy. Go to 72t.Net |IRC Section 72(t) | 72t Distribution | 72t Calculators | SEPP Plans to get details. You can calculate your payments yourself and when ready request monthly payments from tsp. you can't change the payments at all until your 59.5? You will have to claim exemption from penalty. Turbo tax will ask the right questions. It is form 5329.
 
I retired before 59 1/2, met the 55 and 30 and figured out monthly payments. I took a 5% lump sum one time withdrawl and 95% toward monthly payments. Found out what 5% of my balance was and divided it by 12 and made that my monthly payment. I am locked into this amount until I.m 59 1/2 or 5 years, which ever is longer. So at 62 I can change the amount. I don't know if I can do the annual change that they offer and haven't taken the chance. If I continue to do well in my TSP, I'll add another 2 1/2% to my withdral rate at 62.:)
 
Fireman did you get your answer?

Yes and thanks. As I first stated, it will be a moot point for me as I will be 60 before I retire. I was just asking for some co-workers who may not be 59 1/2 when they retire. But I try to help folks as much as I can.
 
Very confusing. IRS Publication 721,dated 2011, page 13, gives two options, the 72T as clester did, or a cash withdrawal at 55 or older.

Here is what the IRS Publication states:

Tax on Early Distributions:

Any money paid to you from your TSP account before you reach age 59 1/2 may
be subject to an additional 10% tax on early distributions.
However, this additional tax does not apply in certain situations, including any of the following:

You receive the distribution and separate from government service during or after the calendar year in which you reach age 55.

You choose to receiver your account balance in equal monthly payments based on your life expectancy.

You are totally or permanently disabled.

For more information, see publication 575, Tax on Early Distributions.
 
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As I previously stated when I began this post, I did attend a TSP seminar at our national convention last week. It was moderated by 2 of the head honchos from the thrift board. They verified what some people posted on here. You can access your TSP when you separate from federal service (retire, quit, laid off, etc.) without penalty if you make a withdrawal in the year you turn 55 or after. An automatic 20% federal tax is withheld prior to distribution for a partial or full lump-sum withdrawal. You may also make an age-based withdrawal beginning at age 59 1/2. Thanks to all who helped with answers. Everyone have a wonderful day.
 
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