TSP 72(t) Rule: Access Your TSP Before 55 Without Penalty

Last Updated: January 27, 2026 Reading Time: 10 min

Most federal employees know about the Rule of 55, which allows penalty-free TSP withdrawals if you separate from service in the year you turn 55. But what if you need access to your TSP earlier? The 72(t) rule, also called Substantially Equal Periodic Payments (SEPP), lets you tap your TSP at any age without the 10% early withdrawal penalty.

There's a catch. Once you start 72(t) payments, you can't stop or change them for at least five years. Break the rules, and you'll owe the 10% penalty retroactively on every dollar you already withdrew.

Key Takeaways

• The 72(t) rule lets you access TSP before 59½ without the 10% penalty through Substantially Equal Periodic Payments (SEPP)
• You must continue payments for 5 years OR until age 59½, whichever is longer
• Three IRS-approved calculation methods: RMD (lowest), Fixed Amortization (mid), and Fixed Annuitization (highest)
• Breaking the rules triggers a retroactive 10% penalty on ALL prior withdrawals
• Rule of 55 is usually better if you're separating from federal service at 55+

What Is the 72(t) Rule?

Section 72(t) of the Internal Revenue Code allows you to withdraw from retirement accounts before age 59½ without paying the 10% early withdrawal penalty. The withdrawal must be part of a series of "substantially equal periodic payments" (SEPP) based on your life expectancy.

This applies to TSP, IRAs, and other qualified retirement plans.

The basic deal: You commit to taking a fixed payment amount each year for a set period. In exchange, the IRS waives the 10% early withdrawal penalty. You still owe regular income tax on traditional TSP withdrawals.

Who Should Consider 72(t)?

The 72(t) rule makes sense in specific situations:

• Early retirees under 55 who need income before the Rule of 55 kicks in
• Career changers leaving federal service before MRA
• Disability situations where the disability exception doesn't apply
• Bridge income needs between early separation and Social Security/pension

It does not make sense if you:

• Can wait until 55 and use the Rule of 55 instead
• Need flexible access to your funds
• Might need to change your withdrawal amount
• Have other non-retirement savings to draw from first

72(t) vs Rule of 55 vs IRA Rollover

Federal employees have several options for early TSP access. Here's how they compare:

Option	Age Requirement	Lock-In Period	Best For
72(t)/SEPP	Any age	5 years or until 59½	Early separators under 55
Rule of 55	Separate at 55+	None	Retiring at 55+
Rule of 50	Separate at 50+ (LEO/Fire/ATC)	None	Public safety retirees
IRA Rollover	59½ for penalty-free	None	More investment options
Disability	Any age (total/permanent)	None	Disabled employees

Critical warning: If you roll your TSP to an IRA, you lose the Rule of 55 benefit. The IRA 72(t) rules are identical, but you'd be locked in longer than necessary if you could have used Rule of 55.

When Rule of 55 Beats 72(t)

If you're separating from federal service at age 55 or later, the Rule of 55 is almost always better:

• No lock-in period. Take what you need, when you need it.
• Flexibility. Change amounts year to year.
• No retroactive penalty risk. No compliance trap.

For law enforcement, firefighters, and air traffic controllers, the Rule of 50 provides the same flexibility at an even earlier age.

The Three 72(t) Calculation Methods

The IRS approves three methods for calculating your SEPP amount. Each produces a different annual payment. You can't pick an arbitrary amount.

1. Required Minimum Distribution (RMD) Method

How it works: Divide your account balance by your life expectancy factor from IRS tables. Recalculate each year.

Payment level: Lowest of the three methods

Flexibility: Most flexible since you can make a one-time switch FROM this method (but not TO it from another method)

Best for: Those who want smaller withdrawals and can tolerate annual fluctuation

Example: $500,000 balance at age 52 with 31.0 life expectancy factor = $16,129/year

2. Fixed Amortization Method

How it works: Calculate payments as if you're amortizing your balance over your life expectancy using an interest rate up to 120% of the federal mid-term rate or 5%, whichever is greater.

Payment level: Middle to highest, depending on interest rate used

Flexibility: Payments stay fixed for the entire period (no recalculation)

Best for: Those who want predictable income and need moderate withdrawals

Example: $500,000 balance at age 52 using 5% interest rate = approximately $25,000-$30,000/year

3. Fixed Annuitization Method

How it works: Divide your account balance by an annuity factor derived from IRS mortality tables and an interest rate (same rate rules as amortization).

Payment level: Similar to amortization, sometimes slightly higher

Flexibility: Payments stay fixed for the entire period

Best for: Those who want the maximum penalty-free withdrawal

Example: $500,000 balance at age 52 = approximately $26,000-$32,000/year

Which Method Should You Choose?

If You Need...	Choose...	Why
Lowest possible withdrawals	RMD Method	Preserves more for later
Predictable fixed income	Amortization	No annual recalculation
Maximum withdrawals	Annuitization	Highest payment typically
Option to reduce later	RMD Method	Can switch TO RMD from other methods

Important: You can make a one-time, irrevocable switch TO the RMD method from either of the other methods. You cannot switch away from RMD or switch between Amortization and Annuitization.

The 5-Year Rule (and the 59½ Rule)

The 72(t) commitment period is where most people get tripped up.

The rule: You must continue SEPP payments for the longer of:

• 5 years, OR
• Until you reach age 59½

If You Start At	You Must Continue Until	Total Years
Age 50	Age 59½	9.5 years
Age 52	Age 59½	7.5 years
Age 54	Age 59½	5.5 years
Age 55	Age 60	5 years
Age 57	Age 62	5 years

Starting later means a shorter total commitment if you're 55+. But if you can wait until 55 and separate from federal service, the Rule of 55 has no commitment period at all.

How to Set Up 72(t) Payments from TSP

Setting up SEPP from TSP requires careful planning. Here's the process:

Step 1: Calculate Your Payment Amount

Before contacting TSP, determine your payment using IRS-approved methods. Use a 72(t) calculator or work with a financial advisor experienced in SEPP.

Document your calculation method and the figures used:

• Account balance (use a specific date)
• Life expectancy factor
• Interest rate (if using Amortization or Annuitization)
• Resulting annual payment

Step 2: Separate Your TSP (If Desired)

You can run 72(t) from your entire TSP balance or from a partial rollover to an IRA. Some people split their funds:

• Roll part to an IRA for 72(t) payments
• Keep part in TSP for Rule of 55 access later

This strategy requires careful coordination and typically the help of a financial professional.

Step 3: Set Up Installment Payments with TSP

TSP installment payments can function as your SEPP. Log in to My Account and:

1. Request installment payments
2. Choose monthly, quarterly, or annual frequency
3. Set the fixed dollar amount matching your 72(t) calculation
4. Keep records of your calculation methodology

Step 4: Document Everything

The IRS may ask you to prove your 72(t) payments were correctly calculated. Keep:

• Your calculation worksheet
• The interest rate and life expectancy factor used
• TSP statements showing your balance on the calculation date
• Records of all payments received

Step 5: File Correctly at Tax Time

Report TSP withdrawals on your tax return. To claim the 72(t) penalty exception:

1. Form 1099-R from TSP will show the distribution
2. File Form 5329 to report the exception (code 02)
3. Keep documentation in case of IRS inquiry

5 Mistakes That Trigger Retroactive Penalties

Breaking 72(t) rules doesn't just stop your penalty exemption going forward. It applies the 10% penalty retroactively to every withdrawal you've taken since you started.

Mistake 1: Modifying Payment Amounts

You calculated $24,000/year but decide to take $30,000 one year? That's a modification. Penalty on everything.

Exception: The one-time switch to RMD method is allowed.

Mistake 2: Stopping Payments Early

Your circumstances change and you want to stop withdrawals before completing the 5-year/59½ requirement? Penalty on everything.

Mistake 3: Taking Additional Withdrawals

You take your regular 72(t) payment plus an extra $10,000 for an emergency? The entire SEPP is "busted." Penalty on everything.

Mistake 4: Rolling Over or Transferring Funds

Moving money out of the account funding your 72(t) during the commitment period breaks the arrangement. Penalty on everything.

Mistake 5: Calculation Errors

If the IRS determines your payment was calculated incorrectly, the entire SEPP is invalidated from the start. This is why documentation and professional help matter.

What Doesn't Break 72(t)?

• Death: Beneficiaries don't owe the retroactive penalty
• Disability: Total and permanent disability ends the SEPP without penalty
• One-time switch to RMD method: Explicitly allowed by IRS

Calculate Your TSP Strategy

Before committing to 72(t), model your long-term TSP growth and withdrawal needs. Our free TSP Calculator helps you project your balance under different scenarios.

Consider:

• How much do you actually need in early retirement income?
• Can other assets cover the gap until 59½?
• What's the opportunity cost of withdrawing early vs. letting TSP grow?

Try the TSP Calculator →

When 72(t) Makes Sense for Federal Employees

The 72(t) rule fills a specific gap: accessing TSP penalty-free when you're under 55 and can't use the Rule of 55.

Good fit:

• Separating at 52 with substantial TSP balance
• Need steady income bridge to age 59½
• Comfortable with locked-in payments for years
• Have professional guidance on calculations

Poor fit:

• Can wait until 55 and use Rule of 55
• Need flexible withdrawal amounts
• Have other non-retirement funds available
• Uncomfortable with the compliance risk

For most federal employees, the Rule of 55 is the better option when available. The 72(t) rule is a powerful tool, but the stakes are high if you make a mistake.

Frequently Asked Questions

Can I use 72(t) withdrawals from my TSP?

Yes. TSP participants can set up 72(t) substantially equal periodic payments to access funds before age 59½ without the 10% early withdrawal penalty. You must continue payments for 5 years or until you reach 59½, whichever is longer.

What is the difference between the Rule of 55 and the 72(t) rule for TSP?

The Rule of 55 requires you to separate from federal service in the year you turn 55 or later. The 72(t) rule works at any age but locks you into fixed payments for at least 5 years. If you're still working or separating before 55, 72(t) is your only penalty-free option before 59½.

What happens if I stop 72(t) payments early?

If you modify or stop your 72(t) payments before completing the required period, the IRS applies the 10% penalty retroactively to all previous withdrawals. This can create a massive tax bill years after you took the money.

Which 72(t) calculation method is best?

The Fixed Amortization method typically provides the highest payment amount. The RMD method gives the lowest but most flexible option. Choose based on how much income you actually need, not the maximum available.

Can I change my 72(t) payment amount once I start?

You can make a one-time switch to the RMD method from either the Amortization or Annuitization method. This is irrevocable. Any other changes will trigger the retroactive 10% penalty on all prior withdrawals.

How long must I continue 72(t) payments?

You must continue 72(t) payments for 5 years OR until you reach age 59½, whichever is longer. If you start at 52, you continue until 59½ (7.5 years). If you start at 57, you continue until 62 (5 years).

Related Resources

• TSP Withdrawal Guide 2026: Complete guide to TSP withdrawal options and timelines
• TSP Guide 2026: Comprehensive TSP overview including contribution limits and fund options
• FERS Retirement Guide: Understanding your FERS pension and retirement eligibility
• TSP Calculator: Project your TSP balance and withdrawal scenarios

Sources

• IRS: Substantially Equal Periodic Payments
• IRS Notice 2022-6: Life Expectancy Tables
• TSP.gov: Withdrawals in Retirement
• Fidelity: 72(t) Rule Explained