Ask The Experts: Money Matters

By Mike Miles

55 or 59 1/2?

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Q. Why do the Thrift Savings Plan publications say age 59½ is the earliest someone can receive TSP monies without a penalty, yet I read in your responses to questions that as long as someone retires in the year in which they reach 55 or later, there’s no penalty? I heard someone else at work yesterday who plans on retiring under MRA+10 saying he has to wait until 59½ so he won’t incur a penalty. Why are there two different prevailing understandings?

A. The standard rule applies the early withdrawal penalty to those who have not yet reached age 59½. There is an exception to this rule for participants in the TSP who separate from service during or after the year in which they reach age 55. There aren’t two different prevailing understandings. There are those who understand, and those who misunderstand the rules.

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