If you leave the federal government at age 55 or older, you can withdraw from your TSP without fear of a penalty—as long as you retire immediately.
What Is the Rule of 55? Under the terms of this rule, you can withdraw funds from your current job's 401(k) or 403(b) plan with no 10% tax penalty if you leave that job in or after the year you turn 55. (Qualified public safety workers can start even earlier, at 50.)
The rule of 55 is an IRS provision that allows workers who leave their job for any reason to start taking penalty-free distributions from their current employer's retirement plan in or after the year they reach age 55.
Regarding your specific question, yes, you can begin receiving Rule of 55 distributions from your ``just ended'' employer and then begin new employment elsewhere.
The IRS rule of 55 recognizes you might leave or lose your job before you reach age 59½. If that happens, you might need to begin taking distributions from your 401(k). Unfortunately, there's usually a 10% penalty—on top of the taxes you owe—when you withdraw money early.
The rule of 55 applies to you if: You leave your job in the calendar year that you will turn 55 or later (or the year you will turn 50 if you are a public safety worker such as a police officer or an air traffic controller). You can leave for any reason, including because you were fired, you were laid off, or you quit.
Required minimum distribution (RMD) changes
SECURE 2.0 increases the age you must begin taking RMDs from your TSP account. The start age for RMDs increased from 72 to 73 starting on January 1, 2023.
No taxes are owed when receiving a qualified withdrawal. For Roth TSP money, qualified means the account must have been opened and funded for at least five years and for the earnings, the TSP participant must be 59½ or older (or disabled) to avoid the 10% IRS penalty.
There is no such thing as too much money in the Thrift Savings Plan. If you want your TSP balance to be able to generate an inflation-indexed annual income of $10,000, most financial planners will suggest that you have a $250,000 balance at the time you retire.
Default. (a) Entry . When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend as provided by these rules and that fact is made to appear by affidavit or otherwise, the clerk shall enter the party's default.
Withdrawal Calculation: Under the 72(t) rule, individuals have three IRS-approved methods to calculate the amount of their withdrawals. Conversely under the Rule of 55, individuals can withdraw any amount they choose from their employer-sponsored plan without the need for complex calculations.
Yes, you can legally withdraw your pension before you're 55, though only if you're doing it for health reasons or have a protected retirement age.
To request a TSP withdrawal or distribution after you leave federal service, log in to My Account to begin the request or contact the ThriftLine. Withdrawals and distributions cannot be reversed once they've been processed, so think carefully before you make a move.
Any withdrawal can seriously impact your ability to accumulate sufficient retirement funds. It's also possible that an early withdrawal, even for a financial hardship, can be subject to federal income tax, state income tax, and potentially a 10% early withdrawal penalty.
Do not forget that a significant portion of your pension is taxable, a portion of your social security benefits can be as are any withdrawals from Tax-Deferred Retirement accounts like the Traditional TSP.
are required to withhold 20% of your payment for federal income taxes . This means that in order to roll over your entire payment, you must use other funds to make up for the 20% withheld . Suppose, for example, that you took a $10,000 distribution and wanted to roll it over to another retirement plan or IRA .
If there is a chance that you may go back into federal service, then leaving it in the TSP is probably your best option. Another option is to roll your TSP into an IRA. When you roll your TSP over to a qualified retirement plan, then you won't be hit with any taxes or the 10% early withdrawal penalty.
On the downside, TSP plans offer limited investment choices. Participants can direct their money toward any of 16 TSP funds, including 11 target-date funds and five that invest in sectors ranging from government bonds to international equities.
The 2024 IRS annual limit for regular TSP contributions is $23,000, and the TSP Catch-up annual contributions limit is $7,500. The Catch-up contributions may be made in addition to regular TSP contributions, if you are age 50 or older (or will be turning age 50 in 2024).
For defined contribution plan participants, or IRA owners, who die after December 31, 2019, (with a delayed effective date for certain collectively bargained plans), the SECURE Act requires the entire balance of the participant's account be distributed within ten years.
If there is no beneficiary designation and you die with a balance in your TSP account, the account will be distributed according to the following order of precedence, which is required by law: spouse, then child or children equally (and any share due a deceased child divided equally among that child's descendants), ...
The rule of 55 is a loophole that allows for early withdrawals from workplace retirement accounts. You must be 55 or older in the year you leave your job (for any reason) to qualify for early withdrawals from a 401(k) or 403(b).
If you're at least age 59½ and your Roth IRA has been open for at least five years, you can withdraw money tax- and penalty-free. See Roth IRA withdrawal rules.