TSP one-time withdrawal


Q. I retired as an air traffic controller at age 50 in 2008. In order to take money from TSP, I had to do it based on life expectancy. Now at 57 I want to make a one-time withdrawal. I’m being told I will not be able to do this for some reason (which is not clearly stated anywhere). Why is this? Where is it stated I cannot make a withdrawal? What are my options now?

A. You are facing two sets of rules: IRS and TSP. If you disrupt the series of substantially equal periodic payments (SEPP), you have initiated to avoid an early withdrawal penalty. All of your past withdrawals and all future withdrawals that are not otherwise excepted will be subject to the penalty.

TSP does not allow a partial lump-sum withdrawal after monthly payments have been commenced. Your only options are to change the amount of the payments once each year in January, or to end the payments and withdraw the remaining balance from the account. This withdrawal, if not rolled over to an IRA, will violate the SEPP series and trigger the early withdrawal penalty. You can roll over the distribution to an IRA to minimize the tax impact, but you’ll still have to complete the annual SEPP requirement to avoid the early withdrawal penalty.

Your question deals with a complex and strict set of rules and alternatives, so you should engage a CPA for advice and tax return preparation before proceeding with any changes.


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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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