Q. I am totally and permanently disabled by the VA due to service-connected disabilities. Can I withdraw some of my TSP without the 10 percent penalty? I’ve done some research and all I can find is the 10 percent penalty does not apply to people with total and permanent disabilities, but all the literature implies this rating comes from the Social Security Administration.
A. The TSP does not levy the penalty. You must convince the IRS that you meet the disability exemption requirement. You are permanently and totally disabled if you cannot engage in any substantial gainful activity because of your physical or mental condition. A qualified physician must certify that the condition has lasted or can be expected to last continuously for 12 months or more, or that the condition can be expected to result in death.