TSP Withdrawal Scenarios, Whats Good or Bad?

[strangebrewsmith]

Greetings,
2 scenarios, I would like your opinions about what I am missing or should be aware of.
#1---60 yr old still employed by USPS, can access TSP with no early 10% penalty, pays income taxes and may be in a higher tax bracket. Can do full, one time partial withdrawal (then how do u access rest if wanted, monthtly?) or leave all alone till 70 1/2. Can u take half out, 250,000, and roll into a scottade ira act for more investment options and accessibility?

#2---53 or 56 yr old has early retirement option requirements, can access tsp earlier than 59 1/2, rolls over 250,000 more, less or all to scottrade ira.

It seems that some USPS employees may have TSP options available if they want to take advantage of early retirement by accessing TSP without penalties by an IRA rollover, pulling out money and paying taxes as needed. I love TSP but withdrawals are limiting. Not an option for me but many co-workers think they must stay till 62.

So if people have their ducks in a row and are looking for income compensation for retirement, what am I not seeing here? Other than not contributing during working years.

Look forward to your responses.
Cheers!

 

[tsptalk]

Welcome sbsmith!

In the #2 scenario, it sounds like the rollover's purpose is to take out money to live on?

I hope I don't sound like Mr Obvious because I may be misunderstanding the question, but you can also get a TSP annuity in #2 without incurring the 10% penalty, so that's an option, unless the reason for the rollover to an IRA is for increased investment options. Otherwise, I'm not seeing why the rollover is necessary.

Good discussion!

 

[Rustynutt]

It was my understanding that according to IRS tax rules pertaining to Federal Retirement if at retirement you are at MRA and basically qualify to retirement under the system, you do not pay the 10% withdraw penalty. I'd have to search for the tax form, think it may be buried somewhere in my (rather long) retirement thread.
Keep in mind, out side of this site, I've read quite a few contradiction to the above statement, especially from investment consultants.
In my opinion, the IRS tax form is very clear. Generally, the 10% IRS penalty applies to those under 59 1/2 as you mention above, and retired before they met the 30 year qualification. The IRS form, to my understanding, has a very simple statement. In my example, retiring at 56 1/2 with 30 years (DOD FERS), I would not have to pay the penalty. Neither will I have to exiting under a VERA as I am 56 1/2 with 29 years and 8 months. What the VERA does in effect puts an employee at 30 years service for retirement time in grade, but obviously, the 4 months will not be used to calculate annuity.

I'd check on the form, I had to dig really deep over a period of time to find the information.
I took the option at an early age because of a couple reasons (rants ), but I considered the FERS Supplement pay a benefit I didn't want to loose. It makes about 14k a year under my annuity pay, less if I return to work (outside Federal Service) and have an income over 15K/yr. There is a scale for the reduction over the 15k limit.



Sounds like you are set up very well!