72t withdrawal from TSP account

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L1: 72t withdrawal from TSP account
DOB is 11/2/76. TSP account balance is $577k. I want to quit my job at the end of this year and supplement the income I’ll have from part time gigs with 72t SEPP withdrawals from my TSP. Date of first distribution would be 3/5/19. How do you do this when the account is a TSP rather than an IRA?
2018-03-11 15:33, By: JoSo, IP: []

L2: 72t withdrawal from TSP account
This is not a good idea. Starting a SEPP at 42 will require you to live with the inflexible plan for 17 years, and that is extremely lengthy for a SEPP. A good portion of SEPPs of similar length are busted eventually, and you would then owe retroactive penalties from Day 1 plus interest. A plan from a non IRA account also lacks the flexibility of an IRA account, so if you were going to do this it would be best to keep maybe 10k in the TSP and do a direct rollover of the rest (or amount you need to generate the income required) to an IRA, then use your IRA for the SEPP.
If you have a Roth TSP balance, the Roth portion must be pro rated with the pre tax balance, although the TSP is now authorized to eliminate this requirement. It may take a couple years for that to occur. This applies whether you roll the TSP over to an IRA or take direct distributions from the TSP.
To take SEPP distributions from the TSP you would need to calculate the distribution using a TSP balance after you are positive that all contributions have been made to the account. You would then calculate the SEPP distribution, and divide it by 12 to get a monthly figure. You would then have to convince the TSP that you are taking SEPP distributions if you wanted to avoid mandatory 20% withholding. Otherwise, 20% will be withheld. With current interest rates your annual distribution would be somewhat less than 5% of the account balance.
Once again, there are two large issues:
1) Your plan term of 17 years is extremely long and at risk of being busted at some point.
2) The TSP or other qualified plan is at a disadvantage compared to IRAs to fund a SEPP due to lack of control and support from non IRA Plans.
2018-03-12 01:09, By: Alan S, IP: []

L3: 72t withdrawal from TSP account
Just curious here…why would the length of the plan make it more likely to bust? Just more opportunities to screw something up? I ask because I’m considering a plan that would be 14 years long.
2018-03-12 15:45, By: mikem, IP: []

L4: 72t withdrawal from TSP account
As the saying goes — “The best laid plans of men often go awry.”
14 years is a long time to be sure that you will not need any more money at any time because of voluntary or involuntary loss of employment, disability, unexpected medical costs or emergencies, unexpected disasters to property, unexpected situations involving family (parents, children, siblings, etc.) before 59 1/2.
2018-03-12 16:09, By: dlzallestaxes, IP: []

L3: 72t withdrawal from TSP account
And BTW this website is hands down the best source of information about 72(t) SEPP out there. Thank you for sharing your knowledge with the rest of us.
2018-03-12 15:47, By: mikem, IP: []

L4: 72t withdrawal from TSP account
Anything can happen. I retired at 52 and started my SEPP in 2012. Last July my wife was hit by a drunk driver and we had to buy a new car we hadn’t planned on. I can’t imagine of trying to do this at 42? Either keep working or get more part time work to come up with the income.
2018-03-15 23:11, By: Scott, IP: []

L2: 72t withdrawal from TSP account
I did mine years 3 years ago at the age of 36. Used a low mid term rate at the time and it basically just pulled out the dividends from my account at the time. Fast forward a few years later, my distributions aren’t even pulling all of the dividends from that SEPP IRA, do to dividends increases from my holdings. I figure in 10-15 years I’ll switch from the amortization method over to the RMD method.
2018-03-18 06:24, By: brkr12002, IP: []