Significance of Age 59 as a Federal Employee
Well, now you are officially six months away from your 60th birthday. With that said, you are 30 months away from being eligible to claim social security benefits and 66 months away from being eligible for Medicare.
Building Your Retirement Savings
There’s still hope if you have hit the 59.5 marks and think that you are not well prepared for federal retirement. To help boost the retirement savings of such individuals, the IRS grants special allowances at that age. In addition, the 10% penalty that is charged from early withdrawal is scrapped off for people of that age.
You are still required by the IRS to file withdrawals from your retirement account as income on your tax return despite being exempted from paying the penalty. The money will incur taxation as an ordinary income. In addition, certain Roth TSP and Roth IRA withdrawals will tot be subjected to taxation.
If you are 50 in 2019 or older, you may contribute up to $7,000 for an IRA and up to $25,000 to your TSP. Among the three withdrawals that the TSP offers, we drive our focus on the age-based withdrawals.
Age-Based Withdrawals
Now that you are at the age of 59.5, the only option you can take advantage of is the age-based withdrawal. This is a very useful type of withdrawal as it allows you to take out your money from TSP and into another type of account.
For more control of their money, federal employees may put their money into an IRA or a Roth IRS. Below are the most common reasons federal employees consider taking out their money from TSP:
1. Access to a good number of investment options. Unlike the six different funds offered by TSP, with an IRA, you are introduced to a vast number of investment choices.
1. You need more control and options over how and when to withdraw funds in retirement.
2. You want professional help since you are unsure 0f how to manage your TSP.
You all of a sudden have more flexibility and control to prepare more for your financial life after federal retirement when you hit 59.5. That said, take full advantage of this sweet spot in your federal retirement.
