TSP withdrawal at retirement


Q: I plan on retiring in 2015 from the Postal Service at the age of 56, with 31 years of service. I am FERS and will have about $400,000 in my Thrift Savings Plan account. Would it be wise to withdraw this money at the time of retirement to pay off my mortgage, son’s school loans and all remaining bills? This way, I will have no expenses and could live strictly off my Postal Service retirement and the Social Security Supplement. If I understand it correctly, I wouldn’t be charge a penalty because I would reach my minimum retirement age of age 56. I would, of course, be tax accordingly. Is this correct, and in your opinion, is this a good idea?

A: It’s impossible to say whether it’s a good idea or not without the proper analysis. The answer will depend, in large part, on how the TSP money will be managed if it is not used to pay off the debts. You are correct that you will not be subject to the early withdrawal penalty, but not because you’ve reached your MRA at retirement. It’s because you will retire during or after the year in which you reach age 55.


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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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