TSP payouts after disability retirement


Q: I am 53 years old, and I was a U.S. Postal Service employee with 20 years of service under the Federal Employees Retirement System. I took disability retirement from the USPS in March after suffering injuries in Iraq as a reservist. If I take a full withdrawal from my Thrift Savings Plan account, will I pay a penalty to TSP, and at what percentage? How much will I have to pay in taxes? Will the USPS match my TSP balance? And how long must my money stay in a TSP account before I can make a full withdrawal without a penalty?

A: For the rules covering withdrawal taxes and withholding, see the TSP notice here. The TSP does not levy penalties against withdrawals; that’s a matter for the IRS. Whether you may withdraw your funds without penalty will depend upon the way in which you take the withdrawal and the extent of your disability.

While I’m not an expert on USPS-specific benefits, I don’t know why they would double, or otherwise increase, your TSP balance beyond what has already been contributed to your account. Because you are separated from service, your vested TSP balance is available to be withdrawn immediately.


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Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

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