Retirement is a journey marked by important milestones—ages at which decisions can have lasting impacts on financial security, health coverage and overall well-being. Because many federal employees have been facing major decisions this year about their retirement from federal service, understanding these ages is essential.
Last week, we looked at the important ages that affect Social Security and Medicare. This week, let’s focus on Thrift Savings Plan deadlines and an important age for the FERS Basic Retirement Benefit.
Age 50: The TSP catch-up contribution threshold
At age 50, a significant opportunity opens for your TSP retirement savings. The IRS allows individuals 50 and older to make “catch-up” contributions to tax-advantaged retirement accounts like the TSP as well as 401(k)s and IRAs.
In addition to the standard annual contribution limit, in the year you turn 50, if you exceed the IRS elective deferral (or annual additions) limit, your contributions will automatically start counting toward the catch-up limit ($7,500 for 2025). Just add contributions toward the catch-up limit in the same place as your other TSP contributions. This adds a powerful boost to retirement savings in the final years of employment.
IRAs (Traditional and Roth): The limit on annual contributions to an IRA for 2025 is $7,000. The IRA catch-up contribution limit for individuals 50 and older remains $1,000 for 2025, the same as in 2024. You are always eligible to make a traditional IRA contribution if you have enough earned income.
Tip: Your lump-sum annual leave payment is deferred compensation, or earned income. If you receive this payment after retiring on Dec. 31, it will count as earned income in the following year.
There are no income limits on contributing to an IRA. However, if you or your spouse receive contributions or benefits under an employer retirement plan, your eligibility to deduct contributions to a traditional IRA from your taxable income depends on your modified adjusted gross income (MAGI) and tax filing status.
Age 55: The early retirement rule for TSP distributions
Some employer-sponsored retirement plans, including the TSP and 401(k)s, permit penalty-free withdrawals as early as age 55—if you leave your job in the year you turn 55 or later. This is commonly referred to as the “Rule of 55.”
The rule allows penalty-free withdrawals (though ordinary income taxes still apply) from your current employer’s plan if you separate from service during or after the year you turn 55. This can help bridge the income gap before Social Security or other retirement resources, such as military retirement from the Reserves, become available.
Retired public safety officers (including federal law enforcement officers and firefighters) have an earlier age where distributions from the TSP are not subject to the early withdrawal penalty. If you are a public safety employee as defined in section 72(t)(10)(B)(ii) of the Internal Revenue Code, payments made after you separate from service during or after the year you reach age 50, or after 25 years of service under the TSP, are not subject to the 10% penalty.
This rule is especially important for those considering early retirement under VERA (Voluntary Early Retirement Authority), DSR (Discontinued Service Retirement) or the DRP (Deferred Resignation Program). See page 3 of the TSP booklet “Tax Rules About TSP Payments.”
Age 59½: Accessing TSP accounts without penalty
If you leave federal service without meeting an exception to the early withdrawal penalty, once you reach age 59½ you may begin taking money from your TSP, IRAs, 401(k)s and other qualified retirement plans without the 10% IRS penalty. Regular income taxes still apply, but the penalty is lifted.
This age is also significant for those considering phased retirement or part-time work, as it allows for age-based “in-service withdrawals” from your TSP account.
Ages 60-63: Additional TSP catch-up contributions
Under a change made in SECURE 2.0, a higher catch-up contribution limit applies for employees ages 60 through 63. For 2025, this higher limit is $11,250 instead of $7,500. Your election will carry over each year unless you submit a new one.
Important note for the year you turn 64: If you increase your contributions to meet the higher catch-up contribution limit during the eligible years, be sure to lower your contribution election at the beginning of the year you turn 64. If you continue contributing at the higher amount when you are no longer eligible, you might hit the lower catch-up limit early and miss out on agency/service matching contributions for the rest of the year.
Age 62: Higher FERS benefit computation with 20 years of service
The general formula for FERS annuity computations is:
1% × high-three average salary × years and months of service (including credit for unused sick leave).
However, if you retire at 62 or later with 20 years of service, the formula changes to:
1.1% × high-three average salary × years and months of service (including credit for unused sick leave).
Example:
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At 60, Janet has 20 years of service and a high-three average salary of $100,000. Her benefit is $20,000/year or $1,666/month.
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At 61, with 21 years of service and a $101,000 high-three average, her benefit is $21,210/year or $1,767/month.
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At 62, with 22 years of service and a $102,000 high-three average, her benefit is $24,684/year or $2,057/month.
The difference between 60 and 61 is only $101/month, but the difference between 61 and 62 is $290/month—more than double, thanks to the higher computation rate.
Additionally, if Janet had 20 years of private-sector work before federal service, her FERS Special Retirement Supplement at ages 60 and 61 would not reflect those wages. At 62, her Social Security retirement benefit would be computed using her highest 35 years of wage values, substantially exceeding the FERS supplement.
Age 73: Required minimum distributions begin for the TSP
Tax-advantaged retirement accounts, including your traditional TSP account, traditional IRAs and 401(k)s, require you to start taking minimum distributions annually once you reach 73. Failing to take RMDs can result in steep IRS penalties.
Distributions of Roth money do not count toward satisfying your RMD because Roth balances are not subject to RMDs. Developing a withdrawal strategy can help minimize taxes and ensure you meet annual requirements.
See the TSP publication “Tax Rules About TSP Payments” (pages 9-15).
Conclusion: Charting your course through retirement’s milestones
Each of these ages represents a turning point in your retirement journey, opening doors to new financial strategies, benefits and considerations. The rules governing retirement accounts, Social Security and Medicare are complex and subject to change, so staying informed and proactive is vital.
By paying attention to these milestone ages, you can make choices that maximize your financial security, protect your health and support your desired lifestyle throughout retirement. As always, consulting with a financial adviser who is up to date on current rules can help tailor these general guidelines to your situation.