Q: I read your article on the “best day” to retire and wonder if there are any special considerations for Law Enforcement Officers?
A: Thanks for your question. Yes, there are special considerations for some LEOs and other special category employees. One concern that I overlooked in my article (my apologies) was penalty-free access to the Thrift Savings Plan.
Special category employees are exempt from the early withdrawal penalty if they separate from federal service in the year they turn age 50 or later. Special category employees who began their career in their early 20s are eligible to retire before the year they turn 50 if they have 25 years of qualifying special category service.
Let’s say that Chris became a Special Agent right out of college at the age of 22. She will have her 25 years of qualifying law enforcement service at the age of 47 and will be eligible to retire at that time. If she retires before the year in which she reaches 50, she will face an early withdrawal penalty on anything she takes out of the TSP until she reaches the age of 59 ½. She would, however, be able to avoid the penalty if she followed a life expectancy based withdrawal methodology for five years or until she reaches the age of 59 ½, whichever is longer.
If, on the other hand, she waits until the year in which she reaches the age of 50, she will be exempt from the penalty thanks to HR 2146.
Any special category employee who would be 49 on December 31st would be giving up their penalty free access to the TSP if they left on that date. Of course, they would not receive a January annuity payment if they waited until January to retire, but ten years of penalty free access to the TSP might be worth it. They would also want to leave by the end of the leave year (January 6th this year) if they were going to cash in any annual leave above their carryover amount.