Hi, I'm weighing the 10% penalty

[BigMoneyJim]

I just woke up from a nap, so perhaps I'm reading wrong, but your mention of the 10% penalty sounds misunderstood.

First, my understanding that any withdrawal from TSP (besides a qualified rollover to a traditional IRA) is taxed (federally) as income and will affect your tax bracket if you pass the next threshold. I think it is also taxed as income at the state level, but I'm not sure.

It is the 10% penalty for early withdrawal that may be waived for "first time" home purchase; the withdrawal is still taxed as income.

As you already seem to know, the TSP (and a 401(k)) has conditions for early withdrawals starting at age 55, and an IRA has the 72t exemption for withdrawals before 59.5. The rules have changed since I last looked at them closely, but I don't recall a lump sum withdrawal being feasible. Plus, it is taxed as income.

I'm vaguely wondering if there might be a trick with rolling some funds into a Roth IRA and then using the principal for a down payment or purchase, but there is still income tax on the amount converted to Roth IRA at the time of conversion.

[martyb]

Small correction...you don't have to actually be 55 to withdraw from the TSP penalty-free, you just have to retire sometime in the same year that you turn 55, and you can make the withdrawal. Meaning...you could be 54, and retire in January, but your 55th birthday isn't until December of that same year, and you're still in the clear with regards to the penalty. That's the way it works. Believe me, I've been studying up on this stuff, since I'm CSRS and have been maxing my TSP for a few years now. At one time, I was also thinking of using my TSP to pay cash for a house after retirement, but after doing a lot of research, I've revised that plan substantially. I might be more likely to pay off my house in increments over a few years, possibly 5 or so, by taking only enough from my TSP each year to get me to just under the next higher tax bracket, but no more. That means being careful about setting up the next year's monthly withdrawals with the tax brackets in mind. Just how I'm looking at it right now...there could be a few more tweaks to the plan before it actually is kicked off. I can retire in about 10 months.

[Animorph]

Unless your TSP is way more than you need to retire already, this sounds like a good way to blow through it early and have to go back to w*rk. No current house to sell? Are you renting now? At best you're over paying for the house by 10%.

I'd save outside the TSP for a downpayment and get a mortgage if I really had to.

[martyb]

Quote:

Originally Posted by Animorph Unless your TSP is way more than you need to retire already, this sounds like a good way to blow through it early and have to go back to w*rk. No current house to sell? Are you renting now? At best you're over paying for the house by 10%. I'd save outside the TSP for a downpayment and get a mortgage if I really had to.

I'm assuming you're talking to the OP here, not me. My TSP is in addition to my 2 pensions and other funds, wife's 401k, IRAs, etc.

[jazaddict]

Fellas,
You've all been great. I appreciate all the input.

Short story, I'm headin' out ASAP. I'm prolly gonna roll into an IRA with a portion of the TSP so I can be flexible. Gonna pull as little as I can early & endure the 10% to get a mortgage & 72T as much of the payment as I can. The 0% Florida state income tax will make this acceptable.


I AM gonna work....by choice....as the musician I've worked to become while sloggin the 9to5....and I'm gonna love it.

I'll be debt free, and I'll have enough to live comfortably with my wife.
I haven't "pulled the trigger" on this plan, so if I learn things or choose to work longer, I still can. But 2 things are pushin me....

1)All of my peers, all of the people I've heard of who's situations roughly equate to mine have NEVER regretted retirement.

2)Several people I know have family members or aquantences who've died after only a short period of retirement. I'm of a mind to maximize the balance of my life dedicated to retirement.

[BigMoneyJim]

Quote:

Originally Posted by jazaddict 2)Several people I know have family members or aquantences who've died after only a short period of retirement.

I've always presumed that's a result of someone working until they physically can't anymore and don't know what to do with themselves when they retire. But I don't really have any solid evidence for that hypothesis.

I have seen work-injured people come back to reduced work duty much earlier than they had to (should have?) because they didn't know what to do with themselves at home or couldn't stand spending all day with the spouse. (Or perhaps the spouse couldn't stand the injured person sitting at home all day.)

In any case, it seems to me that the ability to successfully retire includes knowing what to do all day and if a life partner is involved, then buy-in or tolerance from said partner.

[Nords]

Quote:

Originally Posted by jazaddict I AM gonna work....by choice....as the musician I've worked to become while sloggin the 9to5....and I'm gonna love it.

As another famous musician on this board has taught us, jazz is a career you have to save up for...

[W2R]

Quote:

Originally Posted by BigMoneyJim In any case, it seems to me that the ability to successfully retire includes knowing what to do all day and if a life partner is involved, then buy-in or tolerance from said partner.

A co-worker was still working in his 70's to avoid having to spend all day each day working on "honey-do's". Or, so he said....

[jazaddict]

"In any case, it seems to me that the ability to successfully retire includes knowing what to do all day and if a life partner is involved, then buy-in or tolerance from said partner."

Another blessing of mine.... I have a willing partner....and "mission".

I agree that a music career (with even the most modest control) requires preparation and an independent revenue source. I figure I'm a shoe-in for the Denny's/Jack-in-the-box circuit.....and I won't have to teach little urchins who's parents think they're virtuosos (like the teacher my parents hired).