Taking Control of Your TSP Early with VERA and IRS Code 72(t)
By: Brian Gassaway
If you're between 50 and 60 and worried about downsizing or restructuring, VERA may be on the table. One major concern federal employees have is accessing their TSP early without penalties. Thankfully, IRS Code 72(t) may offer a solution.
Key Takeaways
- VERA allows some employees to retire early with full benefits.
- IRS Code 72(t) enables penalty-free TSP withdrawals before 59½.
- SEPP provides structured, reliable income during transitions.
- Proper planning avoids IRS penalties and ensures stability.
Understanding VERA Eligibility
The Voluntary Early Retirement Authority (VERA) allows certain employees to retire early if the agency is undergoing workforce reductions. You may qualify if you have 20 years of service and are at least 50, or 25 years at any age.
The Role of IRS Code 72(t)
This IRS rule allows penalty-free access to retirement accounts before age 59½ if you take substantially equal periodic payments (SEPP). It’s a powerful strategy to use your TSP for income without the usual 10% penalty.
Liquidity During Transitions
Whether you plan to retire early or transition into the private sector, 72(t) offers much-needed liquidity. It’s a financial bridge that lets you support your lifestyle without relying solely on a pension.
Taking Advantage of the Opportunity
Used properly, 72(t) distributions can create consistent income, but they must be carefully calculated and maintained to avoid penalties. Combine with VERA and you've got a pathway to retire early with income security.
Conclusion
If you're facing a potential early retirement, knowing your withdrawal options is essential. IRS Code 72(t) could help you take control of your TSP, penalty-free.
Sources
• https://www.irs.gov/retirement-plans/substantially-equal-periodic-payments
• https://www.tsp.gov/withdrawals/
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