TSP

John Grobe, Federal Career Experts

I recently had a question from a reader who wanted to know if he could take a large withdrawal from his TSP without retiring from federal service. Specifically, he wanted to know if he simply switched agencies, would he be able to take money out of his TSP account.

The answer is no. Without a break in service, the only way for an employed individual to withdraw money from the TSP would be due to a hardship or by means of an age-based withdrawal.

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Age based withdrawals are available to employees who are age 59 ½ or older. Up to four age-based withdrawals can be taken per year, and the amount that can be taken in an age-based withdrawal is limited only by the employee’s vested account balance.

Financial hardship withdrawals can only be taken for specific financial hardships and are limited by whichever is smaller, the amount of the employee’s contributions and earnings or the amount of the demonstrated hardship.

The TSP identifies four hardships:
1) Negative cash flow;
2) Legal expenses related to separation and divorce;
3) Unpaid medical expenses that are not covered by insurance; and
4) Unpaid casualty losses that are not covered by insurance.

It is possible that the Thrift Board will soon allow hardship withdrawals for those who are affected by natural disasters.

If an individual were to separate from federal civilian employment or the uniformed services and then became reemployed by the federal government with a break in service of less than 31 full calendar days, they can’t make post-separation withdrawals from their TSP account.

However, if the break break in service is 31 or more full calendar days, one would be eligible to make a post-separation withdrawal, but the withdrawal request must be received and paid while they are still separated from service.

The TSP and other retirement plans are very strict about allowing those who are still employed to withdraw their savings. After all, the purpose of the Thrift Savings Plan is to set money aside for retirement. If you think you will be needing money prior to retirement, consider stashing it in a taxable account where you will have easy, penalty free, access to the funds.

TSP Update on Financial Hardship Withdrawals

Report: Understanding TSP Withdrawals

TSP Investors Handbook, New 6th Edition