FAQ: The TSP Early Withdrawal Process
If you’re looking to make an early withdrawal from your Thrift Savings Plan, you probably have a good deal of questions to make sure you’re doing it right. It’s good to be prepared which is why we have put together this FAQ page with all of the common concerns we get about the TSP early withdrawal process. When you’re ready, schedule a consultation with Federal Educators St. Petersburg for tailored advice and a personal thrift savings plan overview.
What Are the Potential Consequences For Withdrawing From My TSP Early?
The standard penalty for a TSP early withdrawal is 10%. That’s not counting possible federal and state income tax at the time of withdrawal. This is the case for most federal government employees regardless of financial standing or hardships. If it can be helped, withdrawing from your TSP early should be avoided or saved as a last resort.
At What Age Can I Avoid Early TSP Withdrawal Fees?
The most effective way to avoid early TSP withdrawal fees is by waiting until the federal retirement age. That age would typically be 59 ½, but there are some exceptions. During the year you turn 55, you may be able to withdraw from your TSP earlier without incurring the 10% penalty under certain conditions. To ensure that you meet the requirements for the “Age 55 Rule”, see a financial advisor before taking any action.
Should I Roll Over My TSP Into An IRA?
Regardless of whether or not you wait until federal civilian retirement age, TSPs are subject to 20% federal income tax. One way to circumvent this is by rolling over your fed retirement savings into an IRA or another employer-offered federal employee retirement plan. If you want to minimize your tax penalties when tapping into your TSP funds, it may be worth it to transfer your savings into an IRA first so you can make withdrawals at any point tax-free.
Read more > 2025 TSP Comparison: Roth vs Traditional For Federal Employees
What Are My Other Options If I Have to Tap Into My TSP Early?
As a last resort, people can withdraw from their TSP early as a “hardship” withdrawal. If your situation is deemed a severe financial hardship, you can make an early withdrawal but at the expense of missing out on long-term federal retirement benefits. This is precisely why hardship withdrawals should only be considered if there is no other viable option.
When Should I See a Federal Benefits Advisor?
It is never too early to seek the advice of a federal employee retirement benefits professional for advice on how you should handle your retirement savings withdrawals. Federal Educator’s thrift savings plan overview is a good place to start with getting to know your government employee benefits. There are also workshops available led by certified Federal Educators benefits advisors who give professional advice on the topics you need to know about for smart federal retirement planning strategies.
See when our next federal benefits workshop is scheduled so you can get started on proper federal employee benefits education.
Get the Most of Your TSP With Expert Assistance From Federal Educators!
Schedule a consultation with Federal Educators today to get to know your thrift savings plan so you can make the right decisions when you withdraw. We can teach you what to expect with an early TSP withdrawal and suggestions on what to do next.