TSP withdrawal strategy


Q. My wife and I are FERS employees. We are both considering retiring early if offered Voluntary Early Retirement Authority at ages 50+/- (both with more than 25 years of service). With children still in the picture for some time, access and flexibility with our Thrift Savings Plan accounts are crucial to any plan. I would like to accomplish two things:

1). 72(t) withdrawals until 59½ in one account.

2). Flexibility to roll over funds currently in TSP into a Roth IRA held at another institution (from an IRA as I see no method to do that while the funds are in TSP).

My plan would be to roll over just enough to “fill up” a certain tax bracket, say 15 percent, especially while we have many deductions related to children.

So, my thinking would be to have substantially equal payments out of one account soon after early retirement but not immediately. For the other TSP account, make a one-time partial withdrawal and transfer that to an IRA currently held at another institution. I’m assuming I can make that transfer/withdrawal at age 50 with no penalties, correct? This would allow me to each year assess our taxes and determine what amount of the IRA I would like to convert to my Roth IRA. I would only do a partial withdrawal as I appreciate the low expenses of the TSP, but the inflexibility to convert to a Roth is too limiting.

Does this make sense? And is everything I’ve laid out reasonable and doable?

A. What you’ve proposed is doable, but I’m not sure I see the value in the Roth IRA conversions.


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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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