I'm hoping Nords or some of the other feds here can help me clarify my options for early withdrawals from the TSP. We've got the bulk of our assets in our TSP accounts and getting them back out after separation but before 59.5 is looking challenging. If I can figure this out, I'd like to continue maximizing our TSP contributions for the tax deductions.
1. The MMM-approved 5 year Roth IRA pipeline doesn't seem to work for TSP accounts, because you can only withdraw two times. The first as a partial withdrawal, which can be rolled over, and then a second time as a full withdrawal which must liquidate the account. If we each have 10 years of income in our TSP accounts, taxes on 5x salary is going to be a bitch. Can I roll TSP funds into a traditional IRA, and then do annual rollovers from the traditional IRA to my Roth IRA to smooth out the tax burdern?
2. Alternately, we can allocate part of that second full withdrawal to Substantially Equal Periodic Payments, or buy annuities. With interest rates so low, the payouts don't look very good so I'm not sure the SEPPs are even worth it, vs just saving the money in taxable accounts instead. Do early retiree feds usually take SEPPs?
3. The annuity options are overwhelming, with multiple riders on single life or two kinds of joint life annuities. How do those options play out for couples where both partners are feds?
4. The new health care law has substantially changed health insurance options, which I'm hoping will make this easier because it looks to me like retiring early from federal service means losing all of your health care benefits. If TSP withdrawals continue to be exempt from the 10% early withdrawal penalty if you have health care costs that exceed 7.5% of your AGI, and you're buying private health insurance with an AGI that is near zero, does that mean I can draw from the TSP penalty free? Because that would be a piece of awesome.