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Thread: New to TSPTalk and a bit lost. MRA and 30+ years. Help

  1. Default New to TSPTalk and a bit lost. MRA and 30+ years. Help

    I'm sorry this question is probably so redundant. Please send me to the correct thread, I'm sure it's been posted. I'm MRA(56) and 30+ years and work for the VA. In a nutshell...divorced last year so it's just me. My TSP remained untouched. I would like to retireat aprox age 57. In a perfect world, I would like to have a modest lump sum withdrawal to supplement my pension and SRS. I seem to get no straight answer about options available to avoid the 10% early withdrawal intil age 59 1/2. CFA is pitching IRA conversion...I've heard it's better to stay TSP. I've read to much from different sources which are inconsistent. Help!


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  3. #2

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    Default Re: New to TSPTalk and a bit lost. MRA and 30+ years. Help

    There is an option that allows an early retiree to withdraw from a retirement account, I believe, without penalty. It's called 72t. You can read about it here: 72t Distributions for Early Retirement - Required Minimum Distribution

    Quote Originally Posted by SteveJ View Post
    I'm sorry this question is probably so redundant. Please send me to the correct thread, I'm sure it's been posted. I'm MRA(56) and 30+ years and work for the VA. In a nutshell...divorced last year so it's just me. My TSP remained untouched. I would like to retireat aprox age 57. In a perfect world, I would like to have a modest lump sum withdrawal to supplement my pension and SRS. I seem to get no straight answer about options available to avoid the 10% early withdrawal intil age 59 1/2. CFA is pitching IRA conversion...I've heard it's better to stay TSP. I've read to much from different sources which are inconsistent. Help!
    Weatherweenie's Account Talk
    Expected retirement date: November 2023

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  5. #3

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    Default Re: New to TSPTalk and a bit lost. MRA and 30+ years. Help

    Hi Steve J, I do not believe you are subject to the 10% tax penalty but best to read IRS Pub 721. It is a guide to CSRS but it also discusses FERS and TSP.

    Page 13 and 14 talk about TSP and early penalty and it seems to indicate penalty would not apply to when you reire at 55 or older but you may need to read the whole thing to make sure it fits your particular situation. It also indicates pub 575 is applicable BUT I would follow pub 721 if you see conflicts... 721 should rule for Fed retirement and TSP.

    Also, its important to note that this Fall lots of additional withdrawal options will become available due to new law put in place that will be implemented late this year. It will give persons that are already retired new options as well.

    https://www.irs.gov/pub/irs-pdf/p721.pdf

    https://www.irs.gov/pub/irs-pdf/p575.pdf



    You also Mentioned "CFA" and I'm not sure what that is but I would hold off on any IRA conversion until your sure about that. Seems lots of companies try to get Fed employees to move money over to them but I understand the fees can be much higher and hidden at times. Others on this site can provide better info on that. There are also several threads on that.
    Last edited by DreamboatAnnie; 05-08-2019 at 11:42 PM.
    CURRENT: 3-11-20=100G //Prior: 3-10-20=50G-50F // 3-3-20 =100%F // 3-2-2020= S70, C30 // 2-25-20 = 60G-40F // Chart Links=Page 215, #2575 & 2576

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  7. #4

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    Default Re: New to TSPTalk and a bit lost. MRA and 30+ years. Help

    One more thing, I do not see you as an "early retiree"... You are 55 with 30 years of Fed service and Looks lik pub 721 is exempting us from the "early" penalty.
    CURRENT: 3-11-20=100G //Prior: 3-10-20=50G-50F // 3-3-20 =100%F // 3-2-2020= S70, C30 // 2-25-20 = 60G-40F // Chart Links=Page 215, #2575 & 2576

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  9. #5

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    Default Re: New to TSPTalk and a bit lost. MRA and 30+ years. Help

    Just couldn't let it go. The exception to the early penalty is specified on page 14 of pub 721, but also mentioned at pg 35 of pub 575.


    Quote from pub 721, page 14:
    "Tax on early distributions. Any money paid to you from your TSP account before you reach age 591/2 may be subject to an additional 10% tax on early distributions. However, this additional tax doesn't apply in certain situations, including any of the following.
    • You receive the distribution and separate from government service during or after the calendar year in which you reach age 55."


    Quote from pub 575, page 35:
    "Additional exceptions for qualified retirement plans. The tax doesn’t apply to distributions that are

    From a qualified retirement plan (other than an IRA) after your separation from service in or after the year you reached age 55 (age 50 for qualified public safety employees)..."


    Pub 575, Best to read from pg 33-36. I do not believe TSP is an IRA, but if anyone knows otherwise, please advise. But 721 is soooo clear really should not need any other corroboration.

    Best wishes!!!
    Last edited by DreamboatAnnie; 05-09-2019 at 12:34 AM.
    CURRENT: 3-11-20=100G //Prior: 3-10-20=50G-50F // 3-3-20 =100%F // 3-2-2020= S70, C30 // 2-25-20 = 60G-40F // Chart Links=Page 215, #2575 & 2576

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  11. #6

    Default Re: New to TSPTalk and a bit lost. MRA and 30+ years. Help

    Quote Originally Posted by SteveJ View Post
    I'm sorry this question is probably so redundant. Please send me to the correct thread, I'm sure it's been posted. I'm MRA(56) and 30+ years and work for the VA. In a nutshell...divorced last year so it's just me. My TSP remained untouched. I would like to retireat aprox age 57. In a perfect world, I would like to have a modest lump sum withdrawal to supplement my pension and SRS. I seem to get no straight answer about options available to avoid the 10% early withdrawal intil age 59 1/2. CFA is pitching IRA conversion...I've heard it's better to stay TSP. I've read to much from different sources which are inconsistent. Help!
    Hello Steve, I like staying with TSP due to low fees. One option allows you to elect a lump sum withdrawal but make partial withdrawals monthly. You choose how much you withdraw monthly. i.e. once a year you can change the amount. for example a 4% annual withdrawal might be $ 1000 per month. Should make your TSP principal balance last a long time if you invest conservatively. i.e. should easily be able to earn 4% annually. Amounts withdrawn are taxable. Also, helps reducing the Required Minimum Distribution due starting at age 70 1/2. i.e. if you wait until you are 70 1/2 to start withdrawing your TSP it could put you in a higher tax bracket later. Just another factor to consider. Best of luck to you in your retirement planning!

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  13. #7

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    Default Re: New to TSPTalk and a bit lost. MRA and 30+ years. Help

    That is really interesting! I was always under the assumption that if we were considered an early retiree, even though it is in the rules to retire at MRA + 30, so we were subject to the 10% penalty if you didn't do something like a 72t. These IRS publications indicate otherwise. Thanks for sharing.

    Quote Originally Posted by DreamboatAnnie View Post
    Just couldn't let it go. The exception to the early penalty is specified on page 14 of pub 721, but also mentioned at pg 35 of pub 575.


    Quote from pub 721, page 14:
    "Tax on early distributions. Any money paid to you from your TSP account before you reach age 591/2 may be subject to an additional 10% tax on early distributions. However, this additional tax doesn't apply in certain situations, including any of the following.
    • You receive the distribution and separate from government service during or after the calendar year in which you reach age 55."


    Quote from pub 575, page 35:
    "Additional exceptions for qualified retirement plans. The tax doesn’t apply to distributions that are

    From a qualified retirement plan (other than an IRA) after your separation from service in or after the year you reached age 55 (age 50 for qualified public safety employees)..."


    Pub 575, Best to read from pg 33-36. I do not believe TSP is an IRA, but if anyone knows otherwise, please advise. But 721 is soooo clear really should not need any other corroboration.

    Best wishes!!!
    Weatherweenie's Account Talk
    Expected retirement date: November 2023

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  15. #8

    Default Re: New to TSPTalk and a bit lost. MRA and 30+ years. Help

    Hi, Steve3 !

    I don't mean to get personal, but your comment "...divorced last year..." raised a red flag, in my eyes

    Unless you have that all figured out, in writing, between you and your Ex, and approved by the Court, the Ex has a claim against your TSP, too...regardless of what you decide to do with it !!! Complicated subject, and the Feds WILL ask ! Be sure to take that into account in ALL your retirement planning....just saying...

    Best of luck !


    Stoplight...
    "Too old to rock and roll...too young to die"... - I. Anderson

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  17. Default Re: New to TSPTalk and a bit lost. MRA and 30+ years. Help

    Thanks for the reply Stoplight, I appreciate any and all replies. That has been addressed and approved by the court. My attorney was very aware to cover those bases. He is a friend of both of ours and she had great understanding she was relinquishing all rights to pension and TSP...in writing. She actually has the same pension and TSP not that it matters. I'm very fortunate we are financially equal and had very strong feelings about not touching my retirement. We just split the equity in our home equally and we both left debt free and happy.


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  19. #10

    Default Re: New to TSPTalk and a bit lost. MRA and 30+ years. Help

    Quote Originally Posted by SteveJ View Post
    Thanks for the reply Stoplight, I appreciate any and all replies. That has been addressed and approved by the court. My attorney was very aware to cover those bases. He is a friend of both of ours and she had great understanding she was relinquishing all rights to pension and TSP...in writing. She actually has the same pension and TSP not that it matters. I'm very fortunate we are financially equal and had very strong feelings about not touching my retirement. We just split the equity in our home equally and we both left debt free and happy.
    SWEET !!! (in a sense...never "sweet", when a marriage falls apart... )

    I felt kinda bad even bringing it up in your thread, but I've had friends who never thought about that angle, and ended up retiring with WAY less than they had planned...

    Best of luck to you AND your Ex !


    Stoplight...
    "Too old to rock and roll...too young to die"... - I. Anderson

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  21. Default Re: New to TSPTalk and a bit lost. MRA and 30+ years. Help

    Actually Stoplight, it is SWEET! We started as friends and ended as friends.

    OK, I've read Publication 721 and 575. Once again, my head is spinning. They clearly indicate withdrawal at 55 or older from a qualified retirement plan (not an IRA) is exempt from the 10% penalty. I felt in spots the publications were unclear. A tax representative, when asked about my situation, replied by talking about the 72t rule. A financial Planner talked about the same 72t as well as rolling the TSP creatively into IRA accounts in a way to create cash flow prior to 59 1/2. I just don't understand why it is so hard to get a clear cut answer on this. I'm sure my place in life is not unique. My next move is to seek out a tax expert with knowledge of this subject and what the IRS Publications 721 and 575 mean to me. I could modestly make it on my pension and SRS until 59 1/2 but I don't want to.

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  23. #12

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    Default Re: New to TSPTalk and a bit lost. MRA and 30+ years. Help

    This ex Fed named Dan Jamison has been putting out a document he calls the FERSGUIDE. He used to give it out free, but starting in 2015 he started charging $15 when he retired. It's well worth buying! I have an old copy but can't find it right now so here is link I found online. I will probably buy his 2020 publication because of the law changes on withdrawal options.

    Here is link to 2018 version....partial teaser copy.

    https://www.fersguide.com/wp-content...IDE-TEASER.pdf

    2014 version...full free version for special employees...read pp. 26 to 28. Page 26 states no penalty when withdrawing from TSP account and specifies you do pay penalty if you roll over your TSP to an IRA and then withdraw. Page 28 mentions 72(t) as option for true early withdrawal occurring before age 55
    https://files.ctctcdn.com/ad61f4e920...daf544efa6.pdf


    This is link to his site to buy the latest copy.
    https://fersguide.com/


    Best wishes!!!
    Last edited by DreamboatAnnie; 05-10-2019 at 11:26 PM.
    CURRENT: 3-11-20=100G //Prior: 3-10-20=50G-50F // 3-3-20 =100%F // 3-2-2020= S70, C30 // 2-25-20 = 60G-40F // Chart Links=Page 215, #2575 & 2576

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