Q. My husband is recently retired on FERS Disability and is in interim status. He has roughly $75,000 in his TSP currently but he will not be 59 1/2 until April 2016. We want to have more money in our emergency funds. Can he open a regular IRA in his name now and then rollover the funds in his TSP into this new account after he turns 59 1/2 to avoid the 20% tax penalty?
A. Yes. The early withdrawal penalty is not 20%, it is 10%, and it does not apply to funds rolled over to an IRA.