Rule of 55 Question (Most recent employer stipulation)

[jimbohoward69]

I resigned this summer from the Fed and am on admin leave (w/pay) until 30 Sep 2025. My original plan was to not work again and use the Rule of 55 (turned 55 this past May) to tap into my TSP if necessary. The two pensions that I receive will cover about 60-70% of my current expenses. I also have sizeable Roth IRA and taxable brokerage accounts.

That said, I'm now thinking of doing something part-time...whatever that may be. As I looked over a list of stipulations regarding whether the rule can be used or not, I saw a bullet statement that said "The rule can only apply to the plan for the most recent employer". Does that mean if I went and worked at Home Depot part-time, no dice on the Rule of 55 for the TSP? Even if I were to opt-out of HD's 401K (if offered)?

I've worked for the Fed my entire career, so I'm unsure how corporate entities handle their retirement benefits...or if part-time is even eligible. Just wanted to ensure my bases are covered if I decide to get a side gig at some point.

I've done the research and don't think setting up a 72(t) would be prudent for my situation. Also, I was thinking of "maybe" trying a Roth Conversion next year if I end up not working (my TSP balance is 2 1/2 times larger than my Roth IRA). I guess I would need to transfer a portion of the TSP into a tIRA first before converting?

I know my initial question turned into 3-4 (sorry for the length), but any advice would be greatly appreciated. I'm not worried in the least of outliving my investments, but want to take a measured approach to my post-retirement planning.

 

[Out-to-Lunch]

The TSP is a qualified plan. (I think it is a401(a).) Therefore, you can effect a Roth IRA conversion directly from it:

https://www.irs.gov/pub/irs-tege/rollover_chart.pdf

 

[Out-to-Lunch]

As for "the most recent employer," I think you are safe. The IRS guidance (Retirement topics - Exceptions to tax on early distributions | Internal Revenue Service) says

Separation from service

the employee separates from service during or after the year the employee reaches age 55 (age 50 for public safety employees of a state, or political subdivision of a state, in a governmental defined benefit or defined contribution plan) **

It says nothing about future employment.

I *think* the language you see about "most recent employer" is meant to inform you that you cannot start dipping into your 401(k) from that place you worked in your 30's as soon as you turn 55.