Tax Implications of the Rule of 55 TSP Even though the TSP Rule of 55 lets you avoid the 10% penalty, withdrawals are still taxed as regular income. That means large withdrawals could bump you into a higher tax bracket. TSP Rule of 55 withdrawal rules don’t change the tax status of your distributions—just the penalty exemption. Smart planning involves spreading out withdrawals and ti... https://www.federalpensionadvisors.com/post/tsp-rule-of-55