If you are considering a TSP withdrawal  be aware of the potential for a 10% penalty.
You can always withdraw funds from the TSP after you leave federal service, however to avoid the 10% tax penalty, you must meet one of these exceptions:
Additional 10% Penalty Tax
If you receive a TSP distribution before you reach age 59½, in addition to the regular income tax, you may have to pay an early withdrawal penalty tax equal to 10% of any taxable portion of the distribution not transferred or rolled over. The additional 10% tax generally does not apply to payments that are:
- Paid after you separate from service during or after the year you reach age 55;
- Annuity payments;
- Automatic enrollment refunds;
- Made as a result of total and permanent disability;
- Made because of death;
- Made from a beneficiary participant account;
- Made in a year you have deductible medical expenses that exceed 7.5% of your adjusted gross income;
- Ordered by a domestic relations court; or
- Paid as substantially equal payments over your life expectancy.
Collecting a Deferred Annuity
Many leave federal service for the private sector and often forget to apply for their deferred annuity until long after their eligibility date. If you worked for the civil service or postal service for at least five years before leaving, and didn’t withdraw your funds, you can either collect a deferred FERS annuity  as early as age 60 with 20 years’ service or age 62 with 5 years of service or accept a lump sum payment. The annuity is computed as a regular FERS annuity, see: http://www.federalretirement.net/fers_annuity.htm  to estimate your monthly payment.
CSRS employees that left Federal service before they met the age and service requirements for an immediate retirement benefit may be eligible for deferred retirement benefits . To be eligible, you must have at least 5 years of creditable civilian service and be age 62.
I receive many email messages from former employees in their mid to late 60s that forgot to apply. There is no benefit to wait beyond your eligibility date like there is with Social Security . A deferred annuity does not increase if you defer taking it beyond your eligibility date.
The good news is that all benefits are retro-active to your eligibility date. If you neglected to apply at age 62 for CSRS or as early as age 60 for FERS employees that had at least 20 years of service you will receive a lump sum payment for the time between the commencing date and the date you apply. For example, if you apply at age 65 you would receive a lump sum payment for 3 yrs.
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- Estate Planning Guide (An 11 part series that will help readers prepare for retirement, understand basic estate planning techniques, and compile their personal “Survivor’s Guide” binder.)
The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our article is not intended nor should it be considered investment advice. Our articles and replies are time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.
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