TSP/ 72t option.

Yes, you are correct! Monthly distribution based on life expectancy (72t rules). I was so focused on trying to keep the other definitions (Defined Benefit vs Defined Contribution) straight I totally blew past the 72t exemption. Thanks!
 
Some folks just pay the penalty and get it over with. Then they control of it.

Yikes! 10%! That's pretty severe... why not just roll it over to a self cirected IRA, save the penalty and have full control over it besides?

Rather than accessing it directly, they could use it as security to borrow against and likely pay less interest than they would earn. This would give one liquidity, yet avoid the penatly. Unless someone wants to just blow the cash... Then, the penalty probably is not that great a consideration in the first place. Or, they may have a really hot investment that they are certain will produce so great a return that the prospect of a penalty is not relavent.
 
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