What is the Thrift Savings Plan Age 55 Rule? It may allow you to access your TSP before age 59½ without paying the standard 10% early withdrawal penalty.
If you separate from federal service during or after the calendar year in which you turn 55, withdrawals from the TSP connected to that employment may qualify for the penalty exception. If you leave federal service before the calendar year you turn 55, waiting until age 55 to withdraw does not automatically make the exception available.
Remember that penalty-free does not necessarily mean tax-free. Traditional TSP withdrawals are generally taxed as ordinary income, even when the early withdrawal penalty does not apply. Roth TSP distributions follow separate tax rules.
Before separating from federal service, confirm your eligibility and understand how each withdrawal could affect your taxable income and retirement plan.
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