Age Thresholds For Making A TSP Withdrawal

Age Thresholds For Making A TSP Withdrawal

By TSP Admin
22nd Oct, 2015

Many federal employees wonder what the TSP withdrawal age is and, as a result, may miss out on certain opportunities available to them.  You may be aware that making a TSP withdrawal before age 59½ can result in getting hit with a 10% early withdrawal penalty in addition to the income taxes that may be applicable to the distribution.  So it is wise to be conscious about how you withdraw your TSP funds after you leave federal service, but you do have some TSP withdrawal options while you are still employed.

When you hit 59½, and you are still in federal employment, you can fill out an age-based TSP Withdrawal form (Form TSP-75) and make a full or partial withdrawal from your TSP account, with the same options as you would have (full TSP withdrawal, partial withdrawal, etc.) after separation from service.

But that’s just one of the TSP withdrawal age thresholds. Did you know that there is another way you can make an eligible withdrawal if you wait until age 55 and then retire from service? This can make you eligible to access your TSP funds without having to pay the 10% penalty.

And of course, if you were to pass away, then your beneficiaries should be able to make a TSP withdrawal without having to pay the penalty, regardless of your age at the time you passed away and therefore would receive the value in your TSP account as a death benefit.

More Ways to Avoid the TSP Withdrawal Age Penalty

The IRS allows federal employees who haven’t reached various age thresholds to take distributions without triggering the early withdrawal penalty if the distributions are paid as substantially equal payments over their life expectancy.

Note that if you switch from monthly payments based on life expectancy to a fixed monthly payment amount within five years of beginning your payments, or before you are age 59½, then you may be liable for the 10% penalty tax on all the payments you previously received.

Other cases where the penalty will not apply is annuity payments, or on withdrawals made in a year in which your deductible medical expenses exceed 10% of your adjusted gross income.

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Avoiding the Biggest TSP Mistakes as a Federal Employee

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