Avoiding TSP withdrawal penalty


Q. I will be 54 this year, a FERS employees with a minimum retirement age of 56. I am taking early retirement and leaving the end of July with 32 years of service. What can I do to avoid the 10 percent TSP early withdrawal penalty if I want to start withdrawing this year or early next year?
A. If you’re not fully disabled or have huge medical expenses, you’ll need to either take a series of Substantially Equal Periodic Payments as allowed under IRS code section 72t or use your funds to purchase a life annuity. You should consult a CPA or other qualified tax adviser before going down either path, however.


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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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