Q. I am a federal employee who plans to retire with 30 years of service when I hit the 30-year mark in the year when I am 54 years old. Something that I have read that you talked about was that if I retire in the year when I am 55, then I can fully withdraw my TSP funds. I don’t become eligible to receive a retirement until I hit 56 years and two months. Will my early or deferred retirement allow or not allow me to take advantage of the “no tax penalty” rule that allows for full withdrawals when you retire in the year when you turn 55?
A. Once you have separated from federal service, you are entitled to withdraw your vested TSP balance, regardless of whether, or not, you qualify for an immediate annuity. You annuity status has nothing to do with the taxation of your withdrawal.