Q. I plan to take an early out (Voluntary Early Retirement Authority/Voluntary Separation Incentive Pay) effective Aug. 31, 2011. I am under the Federal Employees Retirement System plan. At the time of my retirement, I will be 54 years old. I have read that if you retire before age 55, your withdrawal/rollover is subject to a 10 percent penalty. I have also read that any action can be postponed, but postponed to what age? 55 or 59.5? Does this mean I cannot withdraw and/or roll over to an Individual Retirement Account until I reach age 59.5? I don’t understand why I would have to let my money sit from age 54 to 59.5 just because I take a VERA/VSIP. Would you please let me know any and all options I may have?
A. You may delay taking your Thrift Savings Plan money until required minimum withdrawals begin, usually at age 70½.
From the notice posted at https://www.tsp.gov/PDF/formspubs/octax92-32.pdf:
“If you receive a TSP distribution before you reach age 59½, in addition to the regular income tax, you may have to pay an early withdrawal penalty tax equal to 10% of any portion of the distribution not transferred or rolled over. The additional 10% tax generally does not apply to payments that are:
* Paid after you separate from service during or after the year you reach age 55;
* 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 7.5% of your adjusted gross income;
* Ordered by a domestic relations court; or
* Paid as substantially equal payments over your life expectancy.”