Accessing Your Thrift Savings Plan

Feb 24, 2020 | Thrift Savings Plan

In past blogs, we have discussed retirement timing and planning for your ideal retirement date. But of course, sometimes things don’t go as planned. In the event that you want or need to retire earlier than you originally scheduled, you might need to access your Thrift Savings Plan and you will want to do so in a way that best benefits you.

Along with Social Security benefits and your annuity payments, withdrawals from your TSP will serve as part of your retirement income. We know, of course, that annuity payments are set according to a complex formula, and Social Security benefits are based upon your age and earnings record. By contrast, you have more varied options with regard to TSP withdrawals.

Your TSP works in a similar fashion to other types of retirement funds. Most investment advice revolves around stashing as much money in the account as possible each year, and leaving it there as long as possible to allow it to grow. Compounding interest makes a big difference over time, and when you take early withdrawals it can be difficult or impossible to make up for lost time. Plus, you could be subject to early withdrawal penalties.

But in the event that you want or need to withdraw funds earlier than planned, you will be interested to know that there are ways to avoid those penalties.

Utilize IRS Code 72-T. This provision allows you to retire without a minimum age restriction, and access the money within your TSP. This rule is subject to special rules, and you should discuss it in detail with an experienced financial advisor before attempting this strategy. We can help you with this option.

Take advantage of special rules that apply to your federal service. You can access the funds in your TSP at age 55 without triggering a penalty. However, you must retire from federal service before taking your withdrawal.

If you’re a Public Safety employee, the rules are even more lenient. All you have to do is retire from federal service, and you can access your TSP at any age without paying a penalty.

Even with these allowances, it can still make sense to leave your money in the TSP as long as possible. You have no idea how many years of retirement are left ahead of you, and allowing that money to grow could be a wise choice. Before you begin TSP withdrawals, let’s meet up to discuss your plans. We can help you evaluate your options and then decide upon a withdrawal strategy if you feel that is the right path for you.

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