Basics of withdrawals in the service

Withdrawals in the Service are withdrawals you make from your TSP account while you are still working for the Federal Government or a member of the Unified Service. In-service withdrawals can seriously affect your TSP account. Remember that the purpose of your account is to accumulate savings for retirement income.

Things to consider:

• Withdrawals permanently reduce your retirement savings and any earnings you earn.
• Withdrawals may be subject to income tax or other penalties.
• If you’re a married FERS participant or a member of the uniformed services, your spouse must sign a consent waiver for your in-service withdrawal.

Withdrawal rules from 59.5 years old In-service withdrawal types and terms:

There are two types of TSP withdrawals for active federal civilian workers and members of the uniformed services: financial hardship and age-59 ½.

Financial hardship in-service withdrawals:

To qualify for a financial hardship withdrawal, you must have a financial need for at least one of the following reasons:

• Recurring negative monthly cash flow.
• Medical expenses (including household improvements needed for medical care) that you have not yet paid and that are not covered by insurance.
• Personal casualty loss(es) that you have not yet paid and that are not covered by insurance.
• Legal expenses (such as attorneys’ fees and court costs) that you have not yet paid for separation or divorce from your spouse.
• Losses due to a major disaster declared by the Federal Emergency Management Agency.

Additional requirements for financial hardship withdrawals

In addition to the eligibility rules, the following apply:

• You cannot withdraw less than $1,000.
• You may only withdraw your own contributions and any earnings those contributions have accrued.
• If you have two separate TSP accounts – a civilian TSP account and a uniformed services account – you can only make a financial hardship withdrawal from the account associated with your active employment at the time of your withdrawal. However, if both of your accounts are linked to your active employment, you can make difficult withdrawals on each account.

When you complete your application, you will be asked to confirm, under penalty of perjury, that you are indeed experiencing financial hardship.

Consequences of withdrawing money because of financial difficulties: Your financial hardship withdrawals are subject to federal income tax and, in some cases, state income tax. If you are under 59.5, you may have to pay a 10% early withdrawal penalty. Any tax-free or Roth contributions included in your withdrawal are not subject to federal income tax. There is also no qualifying Roth income.

Withdrawal rules from 59.5 years old

• You can only withdraw the amount you have invested in (i.e. the amount you are entitled to keep) based on your years of service.
• Your withdrawal at age 59.5 should be at least $1,000 or your full assigned account balance (even if it’s less than $1,000).
• You can only make four withdrawals from age 59.5 per calendar year. If you have two separate TSP accounts – a civilian TSP account and a unified service account – you can only withdraw funds from age 59.5 from your active employment-related account at the time of withdraw money. However, if your two accounts are linked to your active employment, you can withdraw from age 59.5 on each account.

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