Separation and the tax man- a question or two

**ACBrown** · 05-25-2005, 10:46 PM

Hello all,

I am a mailman who has been contributing to his TSP fund for about 5 years. I will probably be separating from this line of employment in 5 or 6 years. As I read over the literature concerning separation I find myself wondering what the best avenue is for handling oneâ€™s TSP money.

It looks like one is going to take a 30% hit if you cash out early. Am I reading the literature correctly here?

Two different questions:

1. What is the smartest thing to do with the TSP money if you are planning on using it for retirement?

2. What is the smartest thing to do with the TSP money if you are planning on cashing it out early? Is there some way to reduce the 30% tax/early withdrawal smack (without becoming disabled, die, become financial strapped, etc.)? Is it simply foolish to take a 30% tax hit... IOW, should one simply leave the money in and leave it alone?

Great website!

Thanks,

Austin

**Birchtree** · 05-26-2005, 12:26 AM

ACBrown,

Leave the money alone and keep working - you probably don't know what life will be like in 6 years- time moves so rapidly. Next year you will be able to put in up to $15,000 plus any match. $15,000 times 6= $90,000, plus any gains you might make.Now you can start thinking in term of getting out the pistols and activate your shooting skills and see if you can lay down some targets with trading. Allow yourself to have some fun - but be judicious. If you terminate leave the moneyin TSP and use the flexibility that is provided in your favor. Regards,

Dennis