Can I draw fixed monthly payments from my TSP til age 62 when I convert to regular retirement?

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I am 55 and have been on disability retirement since 2015 (at 53, after 31 years of Fed service). My annuity is now at 40% and I am having financial difficulties; this will change when I convert to regular retirement at 62, and I will no longer need the monthly payments. I have $326,000 in my TSP.

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Asked on May 5, 2017 9:37 pm
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You could withdraw fixed monthly payments from the TSP that are large enough to cover your budget shortfall. When you elect the option “substantially equal monthly payments of a fixed dollar amount” you are allowed to change the amount of the payments in an annual open season (10/1 through 12/15), but you are not allowed to stop the payments under the current TSP withdrawal rules.
You are, however, allowed to reduce the amount of the payments to as little as $25 a month – which is tantamount to stopping.
It will be seven years until you reach the age of 62 and legislation (S. 873) has recently been introduced to loosen up the current restrictions, so you may very well be able to totally stop payments when you reach that 62.
If you were under the age of 55 when your disability retirement was effective, you might be subject to the 10% early withdrawal penalty on anything you take out of the TSP until you reach the age of 59 1/2. There is an exemption from the 10% early withdrawal penalty if your payments are made as a result of “total and permanent disability”. The TSP will not certify to the IRS that you are totally and permanently disabled, so you will have to tell the IRS yourself when you file your taxes.

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Posted by (Questions: 0, Answers: 61)
Answered on May 6, 2017 6:02 pm