Section 72(t) can apply to the TSP, but it works differently than it does with an IRA. Anyone who separates from federal service in the year they turn 55 or later can already access their TSP without the 10% penalty, which covers most cases. For those who separate earlier, 72(t) and Substantially Equal Periodic Payments (SEPP) are the paths to penalty-free access before 59½.
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Federal employees often assume 72(t) works the same way no matter where the money is held. With the TSP, there's an important wrinkle worth knowing about before you make any moves.
It can apply, but the way it works with the TSP is different than with an IRA. If you separate from federal service in the year you turn 55 or later, you can already take the money out of your TSP without the 10% penalty. That's a separate rule. And for a lot of federal employees, it covers what they need.
If you separate before 55 and want to access your TSP without the penalty, that's where 72(t) and SEPP come in. The rules are strict, and once you start, you have to stick with the payment schedule for at least 5 years or until you turn 59 and a half, whichever is longer.
Understanding which rule applies to your situation before you start drawing on the account can save you from a costly and hard-to-fix mistake.
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