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View Full Version : Dirt cheap TSP retirement at 55 - how to do it? (WORST CASE)



offroad
08-19-2014, 12:41 PM
So lets say I turn 55. And I have $300,000 in TSP, and I want to live on only $15,000 a year (because I am just a cheap bastard - lol!!). Lets say I dont have any pension due. Am not sick, so no medical coverage.


What will be my penalty for withdrawing $15,000 gradually over the year (lets say quarterly at $3500 a quarter)?

I know I know, I have to pay Obamacare insurance premium. Eventually I will get Social Security ten years later.

tctang75
08-19-2014, 12:53 PM
Offroad, you would pay a 10% penalty for any withdrawals prior to age 59 1/2, plus ordinary income taxes. I think not recommended.

offroad
08-19-2014, 01:41 PM
Offroad, you would pay a 10% penalty for any withdrawals prior to age 59 1/2, plus ordinary income taxes. I think not recommended.

this is completely wrong. Everything I read says that if you are older than 55 you do not have to pay the 10% penalty at all, if you fully retire from federal service. Its not in effect. Also if you take withdrawal for medical reasons, or if you take withdrawal as an annuity. Its a bunch of weird exceptions for TSP it seems, if you fully retire. Please read up and correct me.

*****

Also looking at MRA+10 rules for retirement (another weird set of instructions). Since I will have 20 years in, and my Minimum Retirement Age is 56 I get a penalty of 30% off my pension. My pension would say be $20,000 so instead will be $12500 a year immediately (unless I hold off for 6 years and dont want to loose 30%).

GRAND TOTAL --- But lets assume I want money now. I would get $12,500 a year, and I would take $15,000 out of TSP so $27,500 a year to live on as a hermit in some small town. until I can collect Social Security at age 67 which boosts me another $20,000 a year to $47,000. But by that age will be glad to wake up every day.

WorkFE
08-19-2014, 01:48 PM
Sounds like you've already made up your mind.

Twenty years from now you will be more disappointed by the things that you didn’t do than by the ones you did do. –Mark Twain

tctang75
08-19-2014, 01:53 PM
Forgive me, I stand corrected. I believe you are correct.

The additional 10% tax generally does not
apply to payments that are:
• Paid after you separate from service during or after
the year you reach age 55;
• Annuity payments;
• Automatic enrollment refunds;
• Made as a result of total and permanent disability;
4
• Made because of death;
• Made from a beneficiary participant account;
• Made in a year you have deductible medical ex
penses
that exceed 10% of your adjusted gross
income (7.5% if you or your spouse is 65 or over);
4
• Ordered by a domestic relations court; or
• Paid as substantially

Frixxxx
08-19-2014, 02:19 PM
So lets say I turn 55. And I have $300,000 in TSP, and I want to live on only $15,000 a year (because I am just a cheap bastard - lol!!). Lets say I dont have any pension due. Am not sick, so no medical coverage.


What will be my penalty for withdrawing $15,000 gradually over the year (lets say quarterly at $3500 a quarter)?

I know I know, I have to pay Obamacare insurance premium. Eventually I will get Social Security ten years later.


this is completely wrong. Everything I read says that if you are older than 55 you do not have to pay the 10% penalty at all, if you fully retire from federal service. Its not in effect. Also if you take withdrawal for medical reasons, or if you take withdrawal as an annuity. Its a bunch of weird exceptions for TSP it seems, if you fully retire. Please read up and correct me.

*****

Also looking at MRA+10 rules for retirement (another weird set of instructions). Since I will have 20 years in, and my Minimum Retirement Age is 56 I get a penalty of 30% off my pension. My pension would say be $20,000 so instead will be $12500 a year immediately (unless I hold off for 6 years and dont want to loose 30%).

GRAND TOTAL --- But lets assume I want money now. I would get $12,500 a year, and I would take $15,000 out of TSP so $27,500 a year to live on as a hermit in some small town. until I can collect Social Security at age 67 which boosts me another $20,000 a year to $47,000. But by that age will be glad to wake up every day.

Based on the information you provided, 56 and twenty years of service make you elligible (if born before 1948). One more year and you get no penalty. 20-21% Annuity? TSP is federal/state elligible tax + 10% IRS Penalty.:cool:

nnuut
08-19-2014, 02:35 PM
I was CSRS and could have retired at 58 with 30 years [would have got 56.25%] but worked another 7 1/2 years to get the additional 15%, why>>>>>MORE MONEY no penalty. Paid off my house, cars and all other debt in those 7 years. A good investment.

nnuut
08-19-2014, 02:40 PM
this is completely wrong. Everything I read says that if you are older than 55 you do not have to pay the 10% penalty at all, if you fully retire from federal service. Its not in effect. Also if you take withdrawal for medical reasons, or if you take withdrawal as an annuity. Its a bunch of weird exceptions for TSP it seems, if you fully retire. Please read up and correct me.

*****

Also looking at MRA+10 rules for retirement (another weird set of instructions). Since I will have 20 years in, and my Minimum Retirement Age is 56 I get a penalty of 30% off my pension. My pension would say be $20,000 so instead will be $12500 a year immediately (unless I hold off for 6 years and dont want to loose 30%).

GRAND TOTAL --- But lets assume I want money now. I would get $12,500 a year, and I would take $15,000 out of TSP so $27,500 a year to live on as a hermit in some small town. until I can collect Social Security at age 67 which boosts me another $20,000 a year to $47,000. But by that age will be glad to wake up every day. I made a withdrawal at 59 1/2 didn't retire then and only had to pay TAXES!

offroad
08-20-2014, 09:08 AM
Frixx - definitely need to study this more. Taking a penalty for one year against the amount I will draw out. Will not be that much of an impact.


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Viva_La_Migra
08-20-2014, 04:40 PM
Frixx - definitely need to study this more. Taking a penalty for one year against the amount I will draw out. Will not be that much of an impact.


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I'm FERS law enforcement. I get shown the door at 57, but I'm thinking I might go at 50. It all depends on where I'm at financially. My pension will be 42% of GS-12, 13, or 14 (preferably :D.) I still might have to have a part time job to keep me off the streets causing trouble, but I think I can make it work.

dhstdog
08-21-2014, 12:47 AM
I'm FERS law enforcement. I get shown the door at 57, but I'm thinking I might go at 50. It all depends on where I'm at financially. My pension will be 42% of GS-12, 13, or 14 (preferably :D.) I still might have to have a part time job to keep me off the streets causing trouble, but I think I can make it work.

Viva Im in the same boat as you. Legacy Migra GS 14 and 3 years from my 50th and hope Im ready to walk the line out. I dont live on credit ala Ramsey style and have no debt. Keep plugging away at my tsp and hoping Intrepid takes us to the land of milkand honey. I plan on 72ting my tsp unless FLEOA gets the peace officer bill passed and my wife is also a GS so I fall under her self and family coverage. Ill take my whole pension since She dont need health and my 20 year term life insurance will cover what she would have gotten from the pension if I passed.

Ill use my outside accounts and rentals to bridge the time before OPM actually starts paying. Well at least this is how I hope the next 3 play out but life sometimes get in the way... God speed!