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Thread: 72 T Rules

  1. #1

    Default 72 T Rules

    I want to retire from federal law enforcement at age 50 with 26 years. I want to leave my money in TSP and begin drawing it at a later age, say 54 1/2? Can I leave my money in TSP, let TSP do my calculations based on life expectancy when I want to start withdrawing and have that meet the 72T withdrawl criteria? Also, it is my understanding that once you begin 72T withdrawls you can not change them for 5 years or is it until you reach age 59 1/2 or both? At age 60 would I then be able to switch to monthly payments of my choice?


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  3. #2

    Default Re: 72 T Rules

    Welcome SteveS. I saw you put this in the "Ask Tom" forum, but I'm not really a retirement expert so I moved it here where hopefully more will see it.

    I want to say, yes, you can leave it in the TSP until you are ready to do a 72T, but I'll let those who may know better respond.

    Here's a link to some 72T info: http://www.dinkytown.net/java/Retire72T.html
    Tom
    Market Commentary | My Blog | TSP Talk Plus | |

    I am not a Registered Investment Advisor and this is not investment advice. Please do your own due diligence.

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  5. #3

    Join Date
    Jun 2004
    Location
    Boiled Peanut, Georgia, USA
    Posts
    76,391

    Default Re: 72 T Rules

    I'm really not familiar with 72T, but welcome to the Message Board and Best of luck!
    Norman



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  7. #4

    Default Re: 72 T Rules

    I am a 50 yr old retired fed LEO & began receiving "life-expectancy" payments from TSP just this year.

    Once begun as "life-expectancy" payments the payments must continue for five years or age 59.5 - whichever is later. After that time you may change to monthly payments of your choosing.

    From what I understand it depends on how TSP codes your 1099 for the year whether or not you will have to file additional paperwork to substantiate the payments you received meet the requirements of 72t - and thus exempt from the 10% early withdrawal penalty.

    I have been unable to get specific information from TSP as to how they will code my 1099 in this situation, although both the TSP literature & the IRS regs I have found say the payments will be penalty exempt.

    Ask me again in January & I'll let you know how they coded my 1099.

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  9. #5

    Talking Re: 72 T Rules

    Quote Originally Posted by SteveS View Post
    I want to retire from federal law enforcement at age 50 with 26 years. I want to leave my money in TSP and begin drawing it at a later age, say 54 1/2? Can I leave my money in TSP, let TSP do my calculations based on life expectancy when I want to start withdrawing and have that meet the 72T withdrawl criteria? Also, it is my understanding that once you begin 72T withdrawls you can not change them for 5 years or is it until you reach age 59 1/2 or both? At age 60 would I then be able to switch to monthly payments of my choice?
    Quote Originally Posted by Texarkandy View Post
    I am a 50 yr old retired fed LEO & began receiving "life-expectancy" payments from TSP just this year.

    Once begun as "life-expectancy" payments the payments must continue for five years or age 59.5 - whichever is later. After that time you may change to monthly payments of your choosing.

    From what I understand it depends on how TSP codes your 1099 for the year whether or not you will have to file additional paperwork to substantiate the payments you received meet the requirements of 72t - and thus exempt from the 10% early withdrawal penalty.

    I have been unable to get specific information from TSP as to how they will code my 1099 in this situation, although both the TSP literature & the IRS regs I have found say the payments will be penalty exempt.

    Ask me again in January & I'll let you know how they coded my 1099.
    Gosh !!! You guys are something esle.

    That is simply amazing !!!

    WOW -- 50 is like the 'ultimate prime of life' to me. That's about the time you're old enough to finally understand LIFE well enough to know how to live and make the most out of the years to come.

    I hope you both the very best !!!


    My little scadoodles were (and are) still in college when I hit 50 - and I had no other choice but to keep working -- to keep them out of debt. So with me it's up at 4 in the morning millking the cows by hand, using the washboard to clean the clothes, and walking 7 miles in bare feet to catch the bus to work.

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  11. #6

    Default Re: 72 T Rules

    Thanks a bunch Texarkandy. Your strategy sounds exactly like I what I want to do? Once we switch to regular payments will we be able to change/ adjust them on a yearly basis? I would assume we could but you probably know what assume means. Again thanks and let me know how they code your 1099.

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  13. #7

    Default Re: 72 T Rules

    Quote Originally Posted by Texarkandy View Post

    I have been unable to get specific information from TSP as to how they will code my 1099 in this situation, although both the TSP literature & the IRS regs I have found say the payments will be penalty exempt.

    Ask me again in January & I'll let you know how they coded my 1099.
    My understanding is that if you pick the TSP option for life expectancy it will be coded appropriately but if you pick monthly payments based on a 72t formula they will code it as an early withdrawal.

    You will just need to file the form to claim the exemption which is 5329? I think?
    This is my scenario.
    100 G
    RSI - Relative Strength Indicator DMA - day moving average

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  15. #8

    Default Re: 72 T Rules

    Quote Originally Posted by clester View Post
    My understanding is that if you pick the TSP option for life expectancy it will be coded appropriately but if you pick monthly payments based on a 72t formula they will code it as an early withdrawal.

    You will just need to file the form to claim the exemption which is 5329? I think?
    This is my scenario.
    I'm doing TSP life-expectancy payments, so hopefully it will be coded as such and no prob.

    Do you think the filing of a 5329 trips a flag at the IRS for further review?

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  17. #9

    Default Re: 72 T Rules

    Quote Originally Posted by Texarkandy View Post
    I'm doing TSP life-expectancy payments, so hopefully it will be coded as such and no prob.

    Do you think the filing of a 5329 trips a flag at the IRS for further review?
    Maybe. Guess I'll find out. I have all the docs I need though, but I hope I won't need them.
    100 G
    RSI - Relative Strength Indicator DMA - day moving average


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  19. #10

    Default Re: 72 T Rules

    This is an article that I think confirms our thoughts on the life expectancy withdrawls, 72(t), from the TSP plan.
    http://www.myfederalretirement.com/public/767.cfm

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  21. #11

    Default Re: 72 T Rules

    As to "life-expectancy" payments directly from TSP before the age of 55 being exempt from the 10% early withdrawal penalty -I am relying on this: http://www.irs.gov/publications/p721...link1000228248

    .....
    Tax on early distributions. Any money paid to you from your TSP account before you reach age 59½ may be subject to an additional 10% tax on early distributions. However, this additional tax does not 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.
    • You choose to receive your account balance in monthly payments based on your life expectancy.
    • You are totally and permanently disabled.

    .....
    (bolding added for emphasis)



    Note that it says any of the following - not all, or some combination, of the following.




    *

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  23. #12

    Join Date
    Apr 2005
    Location
    Gainesville, Florida, USA
    Posts
    24,244

    Default Re: 72 T Rules

    The IRS wants some of your action - payup and put the money in a Roth account.

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