TSP out-of-service withdrawal


Q. I recently left federal service after three years to pursue grad school in the fall. I am 23, with a little over $15,000 in a Thrift Savings Plan account. I am wondering if I should make an out-of-service withdrawal and transfer the funds to an IRA? Then, once the funds were in an IRA, I could withdraw the funds for education costs without the penalty or 10 percent tax and only face federal income tax, since my state doesn’t have an income tax. I am not receiving financial aid for grad school because of my federal government salary, and will need to take out private loans from a credit union at 7.2 percent or a Federal Graduate Plus loan at 7.9 percent. I am wondering which option makes the most financial sense.

A. Roll over the money, take the withdrawal, avoid the penalty and pay for education. You’ve identified one of the few investment opportunities that is likely to beat the TSP.


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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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