Question 1
Just found your page and it looks really helpful. I am stuck in a retirement training through my agency and it is useless. So started googling and found your articles.
Do you have any articles on how to retire long before your MRA (40s/50s)? Along the lines of F.I.R.E. for feds and is there a way to keep my health insurance until Medicare kicks in?
Answer 1
Many feds are looking to retire early and the most common way to do that is with a deferred retirement. You can qualify for a deferred retirement as long as you have at least 5 years of service.
The big downsides however is that you can’t keep your health insurance (FEHB) and you won’t start your pension until either your MRA (minimum retirement age), age 60, or age 62 depending on how many years of service you had.
Note: The retirement rules are different for special provision FERS.
The only way to retire before your MRA and keep your health insurance is if your agency was to offer an early out at a time that you were eligible.
Question 2
As an age 65+ federal retiree, I’m thinking of taking some of my tax-deferred TSP funds and moving them to an established Roth IRA outside of the TSP. What would be the steps to do this? I know I’d have to pay the taxes. Not any guidance on the TSP site.
Answer 2
You can certainly transfer money from the traditional (tax-deferred) TSP to a Roth IRA but as you mentioned, that is a taxable transfer. Because it is taxable, you may want to be careful on how much you transfer each year to keep your tax bracket down.
One of the most important things to know wherever you are requesting a rollover/transfer from the TSP to an IRA is using the right words.
If you tell the TSP that you want to rollover your TSP to an IRA, they will withhold 20% and then they will send you the rest. At the point, you will have 60 days to get it to an IRA to avoid taxes (for a traditional IRA rollover) and penalties. So to be able to do a full rollover you will have to replace the 20% that the TSP withheld.
What you will want to do in most cases is request a transfer. A transfer is when the TSP will send your money directly to your IRA. With a transfer the TSP will not withhold the 20% and you can avoid penalties (and taxes if it is to a traditional IRA).
