TSP - 72(t) - what form?

[Lakebound]

Rev. Rul. 2002-62 permits a one-time change from either the amortization method or the annuitization method to the required minimum distribution method. If you begin with the required minimum distribution, i.e., life expectancy, you can not change your method to the amortization or annuitization during the 5 year/age 59.5 time period.

Retirement Plans FAQs regarding Substantially Equal Periodic Payments

I opted to start my 72T via the annuitized method (highest amount) because it is a one time calculation and the amount will stay the same, whereas with the minimum distribution (life expectancy) it is recalculated annually and can go up, or down, depending on how your account balance goes each year. I retain the option to change to the life expectancy.

FYI I retired at 49 (Jan 2014 the year I turned 50) under the Special FERS Retirement for LEO's.

Interesting ..... So, I could calculate using life expectancy for just a benchmark. And then, begin my 72T using an amount higher and basically keep my options open to move to the life expectancy calculation later anyway? But then, I won't be exempted from the penalty prior to 55 (I retire at 50). My thinking was to go with the life expectancy calculations and continue working to stay active and busy until 60 and then simply move to an amount each month that I feel that I need to supplement my pension based upon what we want to do in the Golden Years.

Great conversations to consider here. I really appreciate hearing about everyone's experiences and advice moving into retirement.

Frank

 

[Kaufmanrider]

Interesting ..... So, I could calculate using life expectancy for just a benchmark. And then, begin my 72T using an amount higher and basically keep my options open to move to the life expectancy calculation later anyway? But then, I won't be exempted from the penalty prior to 55 (I retire at 50). My thinking was to go with the life expectancy calculations and continue working to stay active and busy until 60 and then simply move to an amount each month that I feel that I need to supplement my pension based upon what we want to do in the Golden Years.

Great conversations to consider here. I really appreciate hearing about everyone's experiences and advice moving into retirement.

Frank

All the monthly payment method (life expectancy, annuitization, amoritization) methods are approved methods under the IRS 72T and exempt from the 10% early withdrawal penalty, no matter your age. I have read postings by people who started 72T plans (in IRA's) in their 40's. Not Feds, on the 72t.net forum.

Work to keep busy? I thought about that, but I find myself keeping fairly busy retired.

 

[Lakebound]

All the monthly payment method (life expectancy, annuitization, amoritization) methods are approved methods under the IRS 72T and exempt from the 10% early withdrawal penalty, no matter your age. I have read postings by people who started 72T plans (in IRA's) in their 40's. Not Feds, on the 72t.net forum.

Work to keep busy? I thought about that, but I find myself keeping fairly busy retired.

I guess that shows you how much I know! I'm looking forward to being a novice retiree.

Frank

 

[skidog]

I retired at age 53 and currently receiving monthly payments from TSP under 72t rules. I wish I had rolled over the funds to an IRA brokerage account before I set the withdrawals in motion under 72t rules so that I had more investing options. I read somewhere that if I did a rollover now before the age 59.5 was achieved that I would owe the back penalty even though I was planning on setting up the new roll over account to receive the same monthly withdrawals under 72t. Can someone comment on this... I'm age 54.5 now so it appears I've got another 5 years to wait to do a penalty free rollover? Thanks!

 

[Kaufmanrider]

I believe you are correct. If you rolled into an IRA outside TSP you'd have to set up a new distribution plan. Your current dustribution plan is with TSP. You'd "bust" your 72t plan through TSP and owe the 10% penalty on distributions you recieved so far, not your entire account balance. You might check out 72t.net and maybe post your question over there.

Personally, I rolled mine at retirement for the same reason, more options and better diversification.

 

[skidog]

Thanks Kaufmanrider.... That's what I was afraid of. I've got plenty of investment ideas focusing on high dividend paying stocks, however I just can't bring myself to invest in the overall markets near all time highs. I'll just have to wait another 5 years to roll the funds over as I don't want to pay the penalty. If we could ever get a solid pull back in the markets, I'd put some money to work in TSP but it hasn't happened in over 3 years.