Let me preface this with saying I retired without doing my homework well. I totally misunderstood how TSP withdrawals worked.
The question:
For people under 59-1/2, does money from a separation partial withdrawal rolled over from TSP into an IRA then become subject to under age 59-1/2 withdrawal penalties from the IRA as distributions are made before age 59-1/2?
The scenario:
I want to take some cash out of TSP. I haven't decided how much yet, but I want to do it quickly and would rather err on taking out more than I need than less. I understand if I don't roll it directly into an IRA via ETF that TSP will withhold 20% for Federal taxes (ouch!). I'm looking for a way to avoid that tax withholdings until I actually use the money. The allowed TSP Partial Withdrawal is not subject to under age 59-1/2 penalties. I was thinking if I rolled my TSP withdrawal to an IRA savings account I could avoid the 20% withholding upfront, and then just take distributions from the IRA as needed. That way any excess withdrawal wouldn't be taxed or have withholdings up front.
The whole plan falls apart if early age based withdrawal penalties apply once it's put into the IRA.
My guess is that it probably is subject to age restrictions since it's no longer TSP money.
Thoughts?
Basic bio info: I've been a premium member here for at least 10 years, but not very active in the forums.
Age 56 now.
34 years postal + 5 military credit.
Retired early June, won't see a pension payment until mid- to late- August as I understand it.
Was forced to switch to FERS in 1987 because I hired USPS five lousy weeks after the retroactive 1984 FERS law was made effective. I'm still bitter about that...Collecting my 79% in one source rather than screwing around with TSP withdrawals and SS would have just been so much easier. LOL
The question:
For people under 59-1/2, does money from a separation partial withdrawal rolled over from TSP into an IRA then become subject to under age 59-1/2 withdrawal penalties from the IRA as distributions are made before age 59-1/2?
The scenario:
I want to take some cash out of TSP. I haven't decided how much yet, but I want to do it quickly and would rather err on taking out more than I need than less. I understand if I don't roll it directly into an IRA via ETF that TSP will withhold 20% for Federal taxes (ouch!). I'm looking for a way to avoid that tax withholdings until I actually use the money. The allowed TSP Partial Withdrawal is not subject to under age 59-1/2 penalties. I was thinking if I rolled my TSP withdrawal to an IRA savings account I could avoid the 20% withholding upfront, and then just take distributions from the IRA as needed. That way any excess withdrawal wouldn't be taxed or have withholdings up front.
The whole plan falls apart if early age based withdrawal penalties apply once it's put into the IRA.
My guess is that it probably is subject to age restrictions since it's no longer TSP money.
Thoughts?
Basic bio info: I've been a premium member here for at least 10 years, but not very active in the forums.
Age 56 now.
34 years postal + 5 military credit.
Retired early June, won't see a pension payment until mid- to late- August as I understand it.
Was forced to switch to FERS in 1987 because I hired USPS five lousy weeks after the retroactive 1984 FERS law was made effective. I'm still bitter about that...Collecting my 79% in one source rather than screwing around with TSP withdrawals and SS would have just been so much easier. LOL
