Q: I am a CSRS employee with 36 years of service and will turn 55 in October 2011. If I withdraw all my TSP funds, will I incur the 10 percent penalty tax? I do not plan to retire for a couple of years.
A: You may only withdraw your funds for a demonstrated financial hardship and you will incur the early withdrawal penalty.
2 Comments
Mr. Miles, your response to this inquiry may be incorrect. From what I understand in his question, he will be 55 years old this year (2011) and will not reitre for a couple of more years.
Based upon one of the 10% tax penalty exceptions cited in the TSP Tax Booklet, if he is paid from his TSP account during or after the year in which he reached aged 55 the penalty will not apply.
I retired as a CSRS employee with 35 years of service on JAN. 1, 2011, I will turn 55 in Sept. 2011, theerfore I separated from service “DURING” or after the year I reach age 55. I will be taking a one-time partial withdrawal in 2011 at the age of 54 and based upon the aforementioned (because I seperated DURING the year I reach age 55) exception I am not subject to the tax penalty. In fact I posed this same question to you last year and you agreed (I also checked with TSP Board and IRS and they concurred).
The first above federal employee has not retired they just want to withdraw funds, there is a difference.