How long after retirement does it take to receive a lump sum payment from TSP?

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For instance, if i retire on September 30, 2017, when can i expect to receive my lump sum distribution?

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Asked on February 22, 2017 3:28 pm
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It generally will take thirty or more days. The TSP will not disburse any money until they are notified by your agency’s payroll office that you have separated from federal service. Your agency’s payroll office will not provide that notice until you have “cleared payroll” (e.g., gotten your final check etc.).

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Answered on February 22, 2017 6:57 pm
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I’m 50 years old now and I’m under FERS. I’m eligible to retire at 56.5 years, I currently have 32 years 9 mths. of federal service. Will I be able to collect my TSP lump sum payment or monthly TSP payments if I retire at 56.5 years old immediately without a penalty? How old do you have to be in order collect your TSP lump sum payment after retirement?

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Answered on April 4, 2017 2:35 pm
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TSP & your federal pension (“annuity”) are 2 separate things. You can opt for a lump sum distribution from TSP and typically receive it within 30 days (see Mr. Grobe’s reply above). You need to be careful though when withdrawing from TSP. If you take lump sum, you have 60 days per IRS to roll that into an IRA or it will become taxable, all of it!! Best thing to do is open an IRA ( around $50) and then do a direct rollover from TSP to the IRA to avoid tax. Afterwards, you can opt to purchase an annuity using the IRA, or let it sit in the IRA, or take incremental distributions (but they will be taxable as you take them). My wife opted for TSP to IRA and then purchased a single-life fixed annuity. She retired 1 JAN so her leave pay out wouldn’t be taxable until next year, so her earned income would be less due to retiring and having a lower income. Let’s say your salary is $60K and you retire in October, your leave pay out will be taxable in the same year as your salary was. If you wait until 1 JAN, your tax liability on the payout will be less because (presumably) your earned income will be less after you retire. Also, try and max out your A/L a year before you plan to retire and then try to minimize leave usage during the year you plan to retire so you can exceed the 240 hour cap (so long as you retire prior to the end of the “leave year”, usually between 6-12 JAN. That way you’ll have the max leave saved up because that will be what you live with until you start receiving your retirement. It typically takes 6-8 months before you start receiving a check and even then, that check is only about 80% of what your final amount will be because it takes OPM about a year until they calculate what your final entitlement is. That’s a long time to go without an income and that cash out will tide you over until you start receiving your retirement.

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Answered on June 28, 2017 6:43 pm