One more rule that matters at 57: the Rule of 55. Separate from federal service in or after the year you turn 55, and the 10% early-withdrawal penalty doesn’t apply to your TSP. I retire at 57 — so the 4.7% comes out penalty-free from day one. No bridge account, no waiting for 59½.
Retirement accounts are built for 59½. Touch the money before that birthday and the IRS normally takes its 10% early-withdrawal penalty off the top, on top of the regular income tax. That single rule keeps a lot of people working years they don’t need to work, bridging the gap with cash accounts and part-time jobs until the calendar gives them permission. The Rule of 55 is the permission slip for people who separate from service in their mid-fifties instead.
The rule is simple, and narrow. Leave your job in or after the calendar year you turn 55, and withdrawals from that employer’s plan — for federal employees, the TSP — are exempt from the 10% penalty. You still owe ordinary income tax; the rule waives the penalty, not the tax. And the exemption lives in the employer plan: it covers the TSP you separate from, not an IRA. Roll the money into an IRA first and the IRA’s 59½ rule is the one that applies to it.
My last working day is December 27, 2038, and I retire that New Year’s Eve at 57 — comfortably inside the rule. From the first year, the plan’s withdrawal rate (a true 4.7%, in the book’s math) comes straight out of the TSP with no penalty haircut and no years of bridge savings earning nothing in a checking account. The years between 57 and 59½ aren’t a gap to survive. They’re just retirement, starting on time.
It’s one of the quiet reasons the whole plan works at 57 instead of 62 — the rest of the stack is in TSP Retirement Strategy for Federal Employees, and the full arc is in How to Retire on a GS Salary.