Federal Employees News Digest

Federal Benefits Q&A

Question: “As I understand it, a FERS retirement at minimum retirement age allows one to withdraw from the regular TSP, but for a Roth TSP, one must wait until age 59.5—and for five years. Is this correct?”

Answer: You are correct with respect to the traditional TSP—a participant can make penalty-free withdrawals (no 10 percent early-withdrawal penalty) if the participant retires sometime during or after the year the participant becomes age 55. Note that withdrawals from the traditional TSP are fully federal- (and in most states, state-) taxable. The same is true with the Roth TSP with respect to penalty-free withdrawals. However, in order to not pay federal and state income taxes on the earnings portion of a Roth TSP withdrawal (Roth TSP contributions were initially taxed and will not be taxed when withdrawn), the Roth TSP participant cannot withdraw it tax-free until two conditions have been met: five years have passed since Jan. 1 of the first year the Roth TSP participant made a Roth TSP contribution—AND the Roth TSP participant becomes age 59.5 or disabled.

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Edward A. Zurndorfer Certified Financial Planner
Mike Causey Columnist
Tom Fox VP for Leadership and Innovation, Partnership for Public Service
Mathew B. Tully Legal Analyst

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