L1: TSPTSP has a withdrawal option where they will figure a monthly payment based on IRS life expectancy tables. I was always under the impression that this satisfied the requirements of 72(t) under the minimum distribution method. However, I read someone on this board, I believe his name was Joel, question whether that really satisfied the requirements of 72(t). Does anyone have a definitive answer?2009-04-22 18:06, By: Dave, IP: [18.104.22.168]
L2: TSPI believe the conclusion from that thread was that a calculated distribution from the TSP would meet 72t guidelines if the distributed amount fell within the guidelines. However, since the TSP does not actively support a 72t, it would be risky to attempt such a plan. For example, if the employee discovered that too much had been distributed, it would likely not be possible to roll the excess amount back within 60 days. The TSP would probably not accept it. It would also be risky to accept the TSP lifetime calculation, and the employee should do their own calculations including verifying the interest rate and account balances from other resources including this site. I think the consensus was that although a 72t could be executed from the TSP, that it would be much safer to roll the TSP funds over and start the plan using an IRA custodian that understood and supported the 72t process.
It is true that the largest TSP index funds have the lowest expense loads around. Still, the advantage is perhaps only6 basis points over Fidelity or Vanguard S&P 500 indexes or ETFs. The TSP expense advantage is not worth the added risk of busting a multi year plan with retroactive penalties and interest at stake. In addition, the IRS is not likely to notify a taxpayer of a problem promptly and that increases the number of years the penalty would apply if the worst happens.
2009-04-22 22:01, By: Alan S., IP: [22.214.171.124]