Disability, TSP withdrawal and early withdrawal penalty


Q. I am 55 years old and in the process of obtaining Postal Service disability. I want to know the tax ramifications if I withdraw my Thrift Savings Plan at 55 after separating from service. I will have 24+ years in. I have $200,000 and want to make monthly payments, not based on life expectancy. I want to withdraw $1,000 a month at 55 for 25 years or so until it is depleted. Am I subject to any additional penalty taxes? I called TSP and the Internal Revenue Service and was told that because I am spreading the monthly payments over 10 years, they would be considered periodic payments and not subject to the 20 percent penalty tax. Is this accurate? Everyone at work thinks I have to be 59½ to avoid the penalties.

A. Your TSP distributions will be included in your tax return and taxed as ordinary income. Since you are separating from service during or after the calendar year in which you reach age 55, no early withdrawal penalty will apply.


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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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