What is the 55 rule for TSP?

What Is It? The Rule of 55 allows workers who leave their job during or after the year they turn 55 to avoid paying the 10% early withdrawal penalty on their retirement account distributions. It doesn't matter why you are leaving, but you must be at least 55 years old in the calendar year you are leaving your job.

What is the TSP rule of 55?

The tsp rule of 55 withdrawal rules allows federal employees aged 55 or older to withdraw funds from their TSP accounts without paying the 10% early withdrawal penalty. This provision applies to individuals who leave their jobs at age 55 or later for any reason, including voluntary retirement.

Can I use the rule of 55 and still work?

Regarding your specific question, yes, you can begin receiving Rule of 55 distributions from your ``just ended'' employer and then begin new employment elsewhere.

Can I withdraw 100% of my TSP?

You can request to receive a total distribution of your entire TSP account balance if you want to take all of your money out of the TSP. Once processed, your TSP account balance will be $0, and you'll no longer be able to move money into the TSP from eligible plans.

How much should I withdraw from my TSP in retirement?

For example, if your TSP is $400,000, then the 4 percent rule says you could withdraw $16,000 per year ($1,333 per month) for the rest of your life. It is important to point out that nobody can predict the future and that there is always some risk with any withdrawal rate.

TSP Rule of 55: Five Crucial Points To Know

How many TSP millionaires are there?

As of June, more than 171,000 participants in the Thrift Savings Plan have accounts totaling over $1 million. That's a little over 2% of all TSP accounts across the board.

What is a good percentage to withdraw from retirement?

The 4% Rule

Introduced in the 1990s by financial advisor Bill Bengen, this rule suggests you can withdraw 4% of your retirement portfolio annually without running out of money for at least 30 years. It's based on historical market data and was designed as a conservative, worst-case scenario.

Is it smart to withdraw from TSP?

Early withdrawal should be considered a last resort. In addition to the penalty, taking funds away from your TSP before retirement could reduce your earnings once you leave your job. If you're investing in a traditional TSP, you don't pay taxes on those distributions.

Can I roll my TSP into a Roth IRA?

If you decide to roll over your TSP assets to an IRA, you can choose either a traditional IRA or Roth IRA. No taxes are due if you roll over assets from a traditional TSP account to a traditional IRA, or if you roll over your contributions and earnings from a Roth TSP account to a Roth IRA.

How long does a TSP withdrawal take?

It generally takes between 7 to 10 business days to process your request once you've properly completed and submitted it. We disburse withdrawals each business day. You can check My Account at tsp.gov or call the ThriftLine to find out the status of your withdrawal request, including whether the payment has been made.

What are the pitfalls of the rule of 55?

By removing funds from your 401(k) at 55, you lose out on valuable years of compounding in that account. Also, remember that while the rule of 55 gives you penalty-free access to your 401(k), it doesn't eliminate taxes on your withdrawals. Those could be substantial during your first year of withdrawals in particular.

How much savings do I need to retire at 55?

Fidelity's guideline: Aim to save at least 1x your salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67. Factors that will impact your personal savings goal include the age you plan to retire and the lifestyle you hope to have in retirement.

Can I take my pension lump sum at 55 and still work?

You can continue to work while you withdraw money from your pension. This can be useful if you need a quick cash boost to immediately pay off a mortgage, clear debts, or take the family on a holiday, for example. However, withdrawing from your pension early reduces the amount of time it has to grow.

Does TSP keep growing after retirement?

You have the option of leaving your entire account balance in your TSP after you retire from the military. The account will continue to accrue earnings. Many retirees choose to keep their money in the TSP because of its low-cost investment funds.

What is a safe withdrawal rate at 55?

Early Retirement (Ages 50-60)

At that age, retirement can last 35 years or longer. Over that span, even modest overspending early on can dramatically increase the risk of running out of money. As a result, many financial models suggest early retirees start with a withdrawal rate closer to 3%.

What is the 4 percent rule for TSP?

In the first year of retirement, calculate 4% of your total TSP balance to determine your initial withdrawal amount. Then, use your cash bucket (the first bucket) to fund this withdrawal. For example, if your TSP balance is $500,000, the 4% Rule suggests you can withdraw $20,000 in the first year.

How long will $500,000 last in retirement?

Yes, retiring comfortably with $500,000 is achievable. This amount can support an annual withdrawal of up to $34,000, covering a 25-year period from age 60 to 85. If your lifestyle can be maintained at $30,000 per year or about $2,500 per month, then $500,000 should be sufficient for a secure retirement.

Which is the biggest expense for most retirees?

What percentage of your pension can you withdraw at 55?

Most personal pensions set an age when you can start taking money from them. It's not normally before 55. Contact your pension provider if you're not sure when you can take your pension. You can usually take up to 25% of the amount built up in any pension as a tax-free lump sum.

What does Dave Ramsey say about TSP?

Dave Ramsey is very fond of both Roth IRAs and the Roth TSP. That is why, the vast majority of the time, Dave Ramsey tells people to just use the Roth TSP instead of the traditional TSP.

What is the highest TSP balance ever recorded?

Notably, those above $500,000 often have two decades or more of contributions. The largest TSP account balance as of March 2025 is $8.73 million—once even hitting a high of nearly $11 million at the end of 2021.

How to make millions with TSP?

Can I fully withdraw my TSP?

If you are 591/2 or older, you can make withdrawals from your TSP account while you are still employed . You must pay income tax on the taxable portion of your withdrawal unless you roll it over to an IRA or other eligible employer plan .

At what age do you have to take required minimum distributions?

You must take your first required minimum distribution for the year in which you reach age 73. However, you can delay taking the first RMD until April 1 of the following year.

Should I rollover my TSP?

Potential for Higher Fees

The TSP is known for funds with very low expense ratios that are among the lowest in the industry. Rolling over your TSP funds to another account may result in higher fees, which can eat into your investment returns over time.