Disbursement at retirement


Q.  I am 58 years old, in FERS, and plan to retire in two months. I am going to roll over my TSP into an IRA and take a large disbursement to pay some bills and get set up. I understand, at retirement, that this one-time disbursement will not be subject to the 10 percent early withdrawal penalty.

However, I have an outstanding loan balance with my TSP. I wanted to use part of my disbursement to pay this loan off, but have been told by TSP it will be considered another disbursement — but it will not be subject to the 10 percent penalty, either. So, it looks like I will be taking three disbursements at retirement: 1) TSP loan repayment; 2) for my personal use; 3) remainder rollover into an approved IRA. Where do I stand in regards to the 10 percent penalty with these disbursements?

A.  Since you are retiring during or following the calendar year when you reached age 55, your TSP withdrawals will be exempt from the early withdrawal penalty. Note that withdrawals from an IRA will not enjoy this exemption until you reach age 59 1/2.


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 fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

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