Author Topic: How do you 72T/SEPP with a TSP?  (Read 666 times)

JoSo

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How do you 72T/SEPP with a TSP?
« on: June 06, 2019, 04:44:34 PM »
Iím 42 y.o. and have 18 years of service with the federal government.  Iíve been thinking about FIREing for nearly a decade.  I originally planned to work 20 years for the federal government to be able to draw my full pension at 60, but I just donít think I can make it that long.  Iím ready to go ASAP.

Iíve saved some money through taxed accounts and have regular rental income and a part time job.  I plan to make it financially solely with these forms of income, and I think itís possible.  However, the large bulk of my money ($650k) is in my TSP with some smaller amounts in 2 Roth IRAs. I may also need to eventually use a 72t/SEPP, preferably from my TSP. 

Several years ago, I posted to 72t.net (now closed), but, at the time, the responders thought I was too young and would end up busting the 72t and owing the IRS a lot of money.  Although, I think I forgot to mention my side gigs at the time, which may have changed their analysis.

Last week, I called the 72tprofessor thatís online. Allegedly, they handle more 72t accounts than any other organization.  They told me I canít do 72t from my TSP and that Iíd have to roll it over into an IRA.  They also recommended an insurance policy to prevent losses in a down stock market.  I honestly wasnít too thrilled about either one of those ideas.

So, my question is:  Can you 72T/SEPP from a TSP, and, if so, exactly how do you do itóstep by step?  The TSP website has something called Substantially Equal Monthly Payments https://www.tsp.gov/PDF/formspubs/tspbk02.pdf.
 Is that the same thing?  If not, what is the proper way to do this?  Has anybody else done this and managed to stay out of trouble with the IRS?  Thank you for reading.

afox

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Re: How do you 72T/SEPP with a TSP?
« Reply #1 on: June 06, 2019, 04:56:28 PM »
Are you aware of the TSP withdrawal changes in the works?
https://www.fedweek.com/fedweek/new-tsp-withdrawal-choices-to-launch-in-september-2019/

Depending on your age have you calculated the cost of just paying the penalty once the new withdrawal options are available?
Some good info with a comparison of the penalty to other options here:
https://www.madfientist.com/how-to-access-retirement-funds-early/

Also, sounds like you will be able to withdraw from your roth balance only (previously withdrawals were only permitted as a ratio of roth/traditional) so depending on the size of your roth balance that might get you by till age 59.5 too.

More details: https://www.tsp.gov/PDF/formspubs/tspfs10.pdf
« Last Edit: June 06, 2019, 05:05:31 PM by afox »

JoSo

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Re: How do you 72T/SEPP with a TSP?
« Reply #2 on: June 06, 2019, 06:41:51 PM »
Thank you for your response.  I was aware thereíd be changes but didnít know specifics.  I probably should sit down and figure out if paying the penalty would be worth it.  My Roths are private IRAs, not Roth TSP.  Thanks again.  I appreciate the information.

Catbert

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Re: How do you 72T/SEPP with a TSP?
« Reply #3 on: June 07, 2019, 11:21:03 AM »
And if you are determined to do a 72t then you'll need to transfer to an IRA first.  But at least now you can choose to only transfer part of your TSP to an IRA.  You could also transfer all/part of your TSP to a tIRA and then do a Roth conversion ladder.