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TSP In-Service Withdrawals

Making withdrawals from the TSP while still working is known as an in-service withdrawal. There are two types: Age-Based 59 1/2 and Financial Hardship.

Age-Based “59 ½”

If you are 59 ½ or older, you can make withdrawals from your TSP account while you are still employed. This is called an “age-based withdrawal” or “59 ½ withdrawal.” You must pay income tax on the taxable portion of your withdrawal unless you transfer or roll it over to an IRA or other eligible employer plan.

You can make up to four age-based in-service withdrawals per calendar year.

You can only withdraw funds in which you are vested (i.e., funds you are entitled to keep, based on your years of service). Being vested means that you’re entitled to keep your Agency/Service Automatic (1%) Contributions (and their earnings) after you work in the federal government or uniformed services for a certain number of years. You’re always vested in the rest of your account.

You have a number of withdrawal options, depending on whether you have both traditional and Roth money in your account or just one type.

If you only have one type (traditional or Roth), you can

  • withdraw a specific dollar amount from your vested account balance as long as it’s at least $1,000, or
  • withdraw your entire vested account balance.

If you have both traditional and Roth, you have those same two options, but you can also

  • withdraw a specific dollar amount ($1,000 minimum) and request that it come only from your traditional balance or only from your Roth balance,
  • withdraw your entire vested traditional balance, or
  • withdraw your entire vested Roth balance.

You may be able to transfer or roll over all or part of your age-based withdrawal to a traditional IRA, a Roth IRA, or an eligible employer plan. However, your eligibility to transfer or roll over, as well as how taxes are applied, depends on the type of money contained in your withdrawal (traditional or Roth) and the type of account that will receive your transfer or rollover. Depending on the type of plan you move your money into, the funds you transfer or roll over may become subject to plan rules different from those that govern the TSP.

Financial hardship

A financial hardship withdrawal is a withdrawal you make while still employed because of genuine financial need. You must pay income tax on the taxable portion of your financial hardship withdrawal, and you may also have to pay a 10% early withdrawal penalty tax.

Acceptable Reasons for Making a Financial Hardship Withdrawal:

  • Negative cash flow – You have negative cash flow if your net income is less than your expenses on a recurring basis.
  • Extraordinary expenses – Extraordinary expenses that are not part of your regular monthly cash flow can also contribute to your financial hardship. You may only include expenses that you have not yet paid and that will not be reimbursed to you. The following are extraordinary expenses you can include in your financial hardship:
  • Eligible medical expenses
  • Eligible personal casualty losses
  • Eligible legal expenses

Rules for Making a Financial Hardship Withdrawal

You cannot withdraw less than $1,000.

The money may only be taken from your own contributions (including money you may have transferred into the TSP from IRAs or eligible employer plans) and the earnings on those contributions.

Your financial hardship withdrawal is limited to the amount of your financial need. When calculating the amount of your financial hardship, you cannot use any expenses that have already been paid or that are reimbursable to you from insurance or other sources.

You cannot make another financial hardship withdrawal from your account for a period of 6 months from the time your payment is processed.

You can make an age-based or financial hardship withdrawals only from an account that’s associated with your active employment. So, for example, if you have a uniformed services account but have left the uniformed services and are now a federal civilian employee, you can only make an age-based or financial hardship withdrawal from your civilian TSP account. If both of your accounts are associated with your active employment (e.g., you’re a federal civilian employee and a reservist), the rules explained here apply to each account separately.

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