ROTH TSP and 10% penalty question?

[Shamus13]

I'm FERS law enforcement. I must retire by 57 but I’m eligible to retire at 50. It looks like I might have major bills paid off at 50 so that would be very enticing.

I’ve been contributing 100% into my ROTH TSP but came across info that say’s I get penalized 10% if I withdraw before I’m 59 ½ . That’s a problem.
I also came across info that says that if I retire at 55 there is no penalty. See Additional 10% Penalty Tax on page 7. https://www.tsp.gov/PDF/formspubs/tsp-536.pdf
I’ve searched the internet all day but I’m still not sure. Will I be hit with a penalty if I take withdrawals before 59 ½ and retire at 55? Also, if you have links to any sites with info so I can have peace of mind.
Thanks.

 

[clester]

I'm FERS law enforcement. I must retire by 57 but I’m eligible to retire at 50. It looks like I might have major bills paid off at 50 so that would be very enticing.

I’ve been contributing 100% into my ROTH TSP but came across info that say’s I get penalized 10% if I withdraw before I’m 59 ½ . That’s a problem.
I also came across info that says that if I retire at 55 there is no penalty. See Additional 10% Penalty Tax on page 7. https://www.tsp.gov/PDF/formspubs/tsp-536.pdf
I’ve searched the internet all day but I’m still not sure. Will I be hit with a penalty if I take withdrawals before 59 ½ and retire at 55? Also, if you have links to any sites with info so I can have peace of mind.
Thanks.

That sounds right for regular tsp withdrawals. You can take 72t withdrawals and avoid penalties too at any age. Not sure if that applies to Roth though.

 

[alevin]

Hi Shamus. welcome. You may want to hang in a bit longer before you retire, or else retire and wait to pull from your Roth tsp until you hit the big 59.5 mark. looks like they sandbagged you guys that are firefighters/leos regarding the benefits of roth tsp, judging from the answer at this link here.

Roth TSP and law enforcement

 

[Skorcher]

Shamus,
There is a specific rule that allows qualified public safety employees to avoid the 10% penalty for early withdrawals. Internal Revenue Code section 72(t)(10) substitutes "age 50" for "age 55" in the case for a distribution from a governmental plan (such as your Roth 401k) to a qualified public safety employee. So if you retire at age 50 and want to make penalty free withdrawals from your Roth 401k the distributions must be substantially equal (per IRC 72(t)). At age 59.5 you can withdraw as much or little as you want without penalty.

 

[Shamus13]

OK. I looked up that exception 72(t)(10) and that makes me feel better. If I feel I need access to my TSP before 59 1/2 I'll take 72t withdrawals. I just need to decide which road is more important:
Retire at 57 with ≈44% of my high 3 & 7 more years of maxed TSP contributions
OR
Retire at 50 with ≈37% of my high 3 & a smaller TSP but enjoy more of life.

Thanks for the help guys.

 

[Kaufmanrider]

I retired at 49 (25 years LEO) with 46% (military time). I opted to go early and enjoy life. If you want to go back to work you can as there is no penalty on earnings (special supplement) until you hit your MRA.

 

[Hallatauer]

Shamus... also check out 72t.net. Lots of great info on that site about the IRS 72t rules.