You may know about the age threshold (70½ ) that the IRS imposes as a requirement to begin receiving mandatory Required Minimum Distributions (RMDs) which can potentially impact your TSP withdrawal options and your TSP account balance. The RMD you must take is equivalent to a specific portion of your TSP Account Balance each year based on the IRS’s life expectancy table.
But did you know about tsp withdrawal deadlines and early withdrawal penalties?
Here is a hint – Always talk with a TSP withdrawal consultant before you begin your TSP withdrawals and be mindful of April 1st.
If you have already separated from federal service, the IRS requires you to make a withdrawal choice before April 1st (of the year following the year you become age 70½, referred to as the mandatory TSP Withdrawal Age). Otherwise, the TSP will then begin making RMDs on your behalf, by April 1 of the following year.
If you are still a federal employee at age 70½, the required withdrawal kicks in only by April 1 of the year following the year you separate from service.
How Do Missing TSP Withdrawal Deadlines impact your TSP Account Balance?
If you do not begin withdrawing from your TSP account after leaving federal service, by the required withdrawal deadline, the TSP can shift your account balance to the G Fund and impose a tsp withdrawal penalty on subsequent withdrawals.