Withdraw Thrift Savings Plan Money from Your Account & Avoid Early TSP Withdrawal Penalty
The Thrift Savings Plan (TSP) can be complex, especially when it comes to the rules surrounding TSP withdrawals, particularly the early withdrawal penalty. This article provides essential tips to help you avoid costly penalties and make informed decisions about your TSP account.
Understanding TSP Withdrawal Options
TSP participants have several options when it comes to withdrawals in retirement. These include single lump-sum distributions, monthly payments, or a combination of both.
Rule of 55: Withdrawals in Retirement
After the SECURE Act 2.0, age 55 became a new exception to the early withdrawal penalty for federal employees. If you separate from service in the calendar year you reach age 55 or later, you can begin taking money from your TSP without penalty.
Special Provisions Withdrawal Rules
Certain federal employees such as law enforcement officers, firefighters, and air traffic controllers have more favorable rules. These employees can access their TSP funds without penalty at age 50 if they separate from service.
Using SEPP for Early In-Service Withdrawals Before Age 59.5
Substantially Equal Periodic Payments (SEPP), also known as the 72(t) rule, offers a method for accessing funds without penalty before age 59.5.
Key SEPP Requirements:
- Payments must continue for 5 years or until age 59½, whichever is longer
- Cannot modify, pause, or stop without retroactive penalties
- Applies to Traditional and Roth TSP
