The Thrift Savings Plan (TSP) is a retirement savings plan available to federal employees and military members. It is similar to a 401(k) plan designed to help individuals save for retirement. However, there may be times when you need to access your TSP funds before you retire. This article will discuss withdrawing money from TSP before retirement and the various options available.
Understanding the TSP Withdrawal Rules
Before exploring the options for withdrawing money from TSP, it is essential to understand the rules and regulations surrounding these withdrawals. According to the TSP guidelines, you must be 59 ½ years old or separated from federal service to withdraw money from your TSP account. However, this rule has some exceptions, which we will discuss in detail later in this article.
Types of TSP Withdrawals
There are two main types of TSP withdrawals: partial and full. Let’s take a closer look at these two options.
Partial Withdrawals
A partial withdrawal allows you to take out a portion of your TSP balance while the remaining amount remains invested and continues to accrue interest. According to the TSP guidelines, you can make one partial withdrawal in your lifetime. Once you make a partial withdrawal, you cannot make another one unless you convert your balance to an annuity or take a full withdrawal.
Full Withdrawal
A full withdrawal involves taking out your entire TSP balance. Once you make a full withdrawal, you cannot make any other withdrawal or contribution to your TSP account. You can also convert your full withdrawal to an annuity, which provides a monthly income stream for the rest of your life.
Withdrawing Money from TSP – The Process
The process of withdrawing money from your TSP account is quite simple. You can either complete the TSP-77 form available on the official TSP website or submit a written request, which includes the following information:
- Your TSP account number
- Your Social Security number
- The amount you would like to withdraw in dollar amounts or percentages
You can then submit the form or written request to the TSP address mentioned on the official website. Once your request is processed, the TSP will send you a check or transfer the requested amount to your bank account if you have provided the necessary information.
Exceptions to TSP Withdrawal Rules
As mentioned earlier, there are some exceptions to the TSP withdrawal rules. These exceptions allow individuals to withdraw money from their TSP account before age 59 ½ or without being separated from federal service. Let’s take a look at these exceptions in detail:
Age-based In-Service Withdrawals
If you are 59 ½ years old or older, you can make in-service withdrawals from your TSP account while still employed by the government. These withdrawals are only available if you have not made other age-based in-service withdrawals.
Financial Hardship Withdrawals
If you are experiencing a financial hardship, you may be eligible for a financial hardship withdrawal from your TSP account. This option is only available to individuals actively serving in the military or currently employed by the federal government.
Age-based Post-Separation Withdrawals
If you have left federal service after age 55, you are eligible for post-separation withdrawals from your TSP account. These withdrawals allow you to take money out of your TSP account without incurring any early withdrawal penalties.
TSP Loans
You can also take out a loan from your TSP account, which needs to be paid back within five years with interest. You can only have one outstanding loan at a time; the minimum loan amount is $1,000.
Frequently Asked Questions
Can I withdraw money from my TSP account after I retire?
Yes, you can withdraw partially or fully from your TSP account after retirement. However, you will have to pay taxes on the withdrawals.
Can I withdraw money from my TSP account to pay for a child’s education?
You can withdraw money from your TSP account before 59 ½ to pay for a child’s higher education expenses without incurring any early withdrawal penalties.
What is the best option for withdrawing money from TSP before retirement?
The best option for withdrawing money from TSP before retirement depends on your financial situation. It is best to consult with a financial advisor before withdrawing to determine the best course of action for your specific needs.
