Changes to TSP withdrawal options proposed

[Osprey]

https://www.washingtonpost.com/news/...o-be-proposed/

Hoping that the bill passes before I retire! Not sure if it addresses issue of having to withdraw pre and post tax funds proportionately.

[Osprey]

Text of Bill:

https://www.portman.senate.gov/publi...6-ED477C282718

[Philliefan33]

I hope this passes. We haven't touched DH's TSP money yet, but more withdrawal options would be nice when we do want/need that $

[Osprey]

Section by section analysis:

https://www.portman.senate.gov/publi...9-487CA66068E1

[Dreamer]

I hope that it passes also. I have not touched mine yet and it would be nice to have options for partial withdrawals.

[samclem]

These are long overdue and pretty good. I wish they would also allow withdrawal at age 55.5 is separated from service (as many 401K plans do), but waiting until 59.5 isn't a hardship.
I'll have to see the details, but for many folks, the TSP could be the destination to which they rollover other 401K-type accounts and IRAs if these withdrawal methods are as flexible as they look. The investing options are fairly limited, but the costs are rock bottom and I could seek out any "tilts" (small, value, etc) in a remaining IRA or after-tax account.

[powerplay]

I would like to see this pass. It would be nice to have more options for TSP withdrawals.

[chicamuxen]

Quote:

Originally Posted by samclem These are long overdue and pretty good. I wish they would also allow withdrawal at age 55.5 is separated from service (as many 401K plans do), but waiting until 59.5 isn't a hardship. I'll have to see the details, but for many folks, the TSP could be the destination to which they rollover other 401K-type accounts and IRAs if these withdrawal methods are as flexible as they look. The investing options are fairly limited, but the costs are rock bottom and I could seek out any "tilts" (small, value, etc) in a remaining IRA or after-tax account.

I believe you can retire at 55 and not have to pay the 10% penalty now.

"If you receive a TSP withdrawal payment before you reach age 59½, in addition to the regular income tax, you may have to pay an early withdrawal penalty tax equal to 10% of any taxable portion of the payment that is not transferred or rolled over. However, if you separate from service during or after the year you reach age 55 (or the year you reach age 50 if you are a public safety employee as defined by section 72(t)(10)(B)(ii) of the Internal Revenue Code), then the 10% early withdrawal penalty tax does not apply."

[samclem]

Quote:

Originally Posted by chicamuxen I believe you can retire at 55 and not have to pay the 10% penalty now. "If you receive a TSP withdrawal payment before you reach age 59½, in addition to the regular income tax, you may have to pay an early withdrawal penalty tax equal to 10% of any taxable portion of the payment that is not transferred or rolled over. However, if you separate from service during or after the year you reach age 55 (or the year you reach age 50 if you are a public safety employee as defined by section 72(t)(10)(B)(ii) of the Internal Revenue Code), then the 10% early withdrawal penalty tax does not apply."

Thanks for mentioning this, it might be useful for some folks. It wouldn't work for me, as I retired from federal service before reaching 50 (or 55). And if I retired from all work for anybody at age 55-59, I couldn't roll my IRA and/or 401(K) money into the TSP and start taking unlimited payments immediately. Withdrawals according to the 72(t) SEPP rules do remain an option at any age, however.

[donheff]

Long overdue change. I plan to keep my TSP funds in the TSP after I reach RMD age regardless but the change will add some flexibility that should have been baked in from the outset.

[zinger1457]

Quote:

Originally Posted by samclem And if I retired from all work for anybody at age 55-59, I couldn't roll my IRA and/or 401(K) money into the TSP and start taking unlimited payments immediately. Withdrawals according to the 72(t) SEPP rules do remain an option at any age, however.

Not exactly sure what you're trying to say but if you retired from federal service at 55 or later you could transfer any IRA or 401K accounts into the TSP after retiring and start withdrawing those funds before you turn 59.5 without penalty. My understanding is once you transfer funds into the TSP those funds are treated like they have always been in the TSP.

[samclem]

Quote:

Originally Posted by zinger1457 Not exactly sure what you're trying to say but if you retired from federal service at 55 or later. .

True. But I retired from federal service at 43. Now that I'm 56 and not working, I still can't start withdrawals from the TSP until age 59. Yes, I can transfer other funds into the TSP, but they are still stuck there (aside from the 72(t)/SEPP option) until I'm 59.