Q. I heard that if you have a Roth TSP and make withdrawals before 59½, the exception under the Defending Public Safety Employees’ Retirement Act does not apply to the earnings portion of the Roth TSP. (I know if you transfer money to a an outside Traditional IRA or Roth IRA, you lose exception).
I am a federal agent who qualifies as a public safety employee, and I’m retiring at age 56. I have money in both a traditional TSP and Roth TSP. I plan to start withdrawing upon retirement. Will I be penalized for having a Roth TSP?
A. There are two issues to consider here: (1) the early withdrawal penalty and (2) the taxability of earnings. The exception to the early withdrawal penalty for public safety employees should cover the Roth account distributions, but the Roth earnings may still be subject to income tax if they are not considered qualified. See the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf for more information. The rules covering this situation are complex, and you should consult a qualified tax preparer for answers and guidance in planning and preparing your affected tax returns.
