VERA at 52


Q. I have been offered a U.S. Postal Service VERA and want to take the offer but can not live on just my annuity.  How do I get to use my TSP before age 55 without taking a penalty? I have 31 years, all with USPS. I have money in my TSP but no other savings.

A. You’ll need to qualify for one of the exceptions to avoid the penalty on withdrawals taken before your reach age 59 1/2 that are not rolled over.

The additional 10 percent tax generally does not apply to payments that are:

•  Paid after you separate from service during or after the year you reach age 55 (or the year you reach age 50 if you are a public safety employee as defined in IRC section 72(t)(10)(B)(ii));
•  Annuity payments;
•  Automatic enrollment refunds;
•  Made as a result of total and permanent disability; 
•  Made because of death;
•  Made from a beneficiary participant account;
•  Made in a year you have deductible medical expenses that exceed 10 percent of your adjusted gross income (7.5 percent if you or your spouse is 65 or over);  
•  Ordered by a domestic relations court; or
•  Paid as substantially equal payments over your life expectancy.

The penalty tax does not apply to any portion of a TSP distribution (including a loan) which represents tax-exempt contributions from pay earned in a combat zone.

Relief from the 10 percent early withdrawal penalty is available to eligible Reservists called to duty for more than 179 days. The Reservist must have been activated after September 11, 2001, and must have received his or her TSP distribution between the date of the order or call and the close of the active duty period. The Reservist may also be eligible to repay the distribution to an IRA (not the TSP). Participants should consult with their tax advisors, legal assistance officers, or the IRS regarding this relief.

See the notice at for more information about the taxation of TSP distributions.


About Author

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 and view his blog at

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