TSP Features for Uniformed Services| Getting Your Money Out After You Separate |
| TSP Features for Uniformed Services |
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What do I need to know before making a withdrawal from my TSP account? 
You are eligible to withdraw your account when you separate from the uniformed services. You can also leave all or a portion of your account in the TSP and withdraw it later. However, there are limits on how long you can leave your money in the TSP. (See "How long can I leave my money in the TSP?" and "What are required minimum distributions?" )
For the purposes of the TSP, either of the following actions will be considered a separation from the uniformed services:
The discharge or transfer may not be followed by a resumption of duty, an appointment to a civilian position (covered by FERS, CSRS, or equivalent system), or continued service in or affiliation with the Ready Reserve within 31 days from the effective date of the discharge or transfer.
When you leave the uniformed services, your service should give you information about your withdrawal options. Download the booklet Withdrawing Your TSP Account After Leaving Federal Service on this Web site, or request the booklet from the TSP. It is important that you read this booklet before you choose a withdrawal option.
Because the tax rules that apply to each of the withdrawal options are complex and may differ depending on the option(s) you choose, you should also read the tax notice "Important Tax Information About Payments From Your TSP Account."
Whether you request your withdrawal on this Web site or on a paper form, your service must report your separation and its effective date to the TSP before your withdrawal can be processed. It usually takes several weeks for payroll offices to send separation data to the TSP.
What are my TSP withdrawal options?
The TSP provides several ways to withdraw your account:
– A single payment
– A series of monthly payments
– A life annuity
A combination of any of the above three full withdrawal options is called a "mixed withdrawal."
You can have the TSP transfer all or part of any single payment or, in some cases, a series of monthly payments, to a traditional IRA or eligible employer plan. You may also be eligible to transfer to a Roth IRA. If you submit a paper form to make your withdrawal request, payments to you can be deposited directly into your checking or savings account by means of electronic funds transfer (EFT).
Note: If your account balance is less than $5 when you separate, it will automatically be forfeited to the TSP. You may subsequently request that this amount be paid to you.
What are the general rules for making a partial withdrawal?
If you did not make an age-based in-service withdrawal from your account while you were still a member of the uniformed services, you can take out part of your TSP account balance and leave the remaining amount in the TSP until later. However, you must begin withdrawing the remaining amount by the withdrawal deadline — generally, when you reach age 70½. (See "How long can I leave my money in the TSP?")
You can request a partial withdrawal in an amount of $1,000 or more. Partial withdrawals are paid only as a single payment. You can have the TSP transfer all or part of the payment to a traditional IRA, eligible employer plan, or Roth IRA (if you are eligible). Payments to you can also be deposited directly into your checking or savings account by means of EFT (if you used an actual, paper form to request your partial withdrawal). Regardless of the withdrawal amount or the balance in your account, your spouse must consent to the partial withdrawal. (See "How do the rights of my spouse affect my withdrawal choice?")
What are the general rules for making a full withdrawal?
If your account balance is $200 or more when you separate from service, you can leave your money in the TSP or you can request to withdraw your entire account in either a single payment, monthly payments or, for amounts of $3,500 or more, a life annuity. You may withdraw your account using any one or any combination of these withdrawal options. For example, you might withdraw your entire account in monthly payments or you might take half of your account as a single payment and half of your account as an annuity. Payments to you can be deposited directly into your checking or savings account by means of EFT (if you submitted your withdrawal request on a paper form).
If you choose to withdraw your account in a single payment, your entire balance is paid at one time. You can have the TSP transfer all or part of any single payment and certain monthly payments to a traditional IRA, eligible employer plan, or Roth IRA (if you are eligible). Tax-exempt balances resulting from contributions from combat zone pay may also be transferred or rolled over into a traditional IRA, or transferred to certain eligible employer plans or a Roth IRA, if the IRA or plan will accept them. Amounts that are not transferred will be paid directly to you. (For additional information about tax-exempt money, see the booklet Withdrawing Your TSP Account After Leaving Federal Service.)
If you choose to withdraw your account in monthly payments, you must also choose whether you want the TSP to compute your payments based on the IRS life expectancy tables or whether you would like to receive a specific dollar amount each month. (See "Can I change my withdrawal after I receive it?") If you choose to receive a specific dollar amount each month, you may be able to transfer all or part of your payments to an IRA or other eligible employer plan. This will depend on the number of payments you are expected to receive. For additional information, read the tax notice "Important Tax Information About Payments From Your TSP Account.")
If you choose to withdraw your account in the form of an annuity, you can have the TSP purchase a single life annuity for you, a joint life annuity with your spouse, or a joint life annuity with someone other than your spouse. You cannot request an annuity with an amount less than $3,500. If you elect an annuity, you must also choose among several annuity features that are available (e.g., a 50 percent or 100 percent survivor benefit or a cash refund or "10-year certain" feature). Not all features are available for every type of annuity. (See Withdrawing Your TSP Account After Leaving Federal Service.)
If you choose to withdraw your account as a mixed withdrawal (i.e., any combination of the full withdrawal options), the rules for each withdrawal option will still apply. Tax withholding rules differ for each option. For example, if you make a mixed withdrawal and you choose to purchase an annuity with a portion of your account, no taxes will be withheld because annuity payments will be taxed as they are made. If you choose monthly payments, the tax withholding rules that apply to your monthly payments will differ depending on whether your payments are based on life expectancy, are expected to last less than 10 years, or 10 or more years. Note: If you elect to transfer all or part of your lump sum payment and your monthly payments, the transfer must be to the same traditional IRA, eligible employer plan, or Roth IRA. (See "How will my TSP benefits be taxed?" and the tax notice "Important Tax Information About Payments From Your TSP Account.")
If your account balance is less than $200 when you separate, the TSP will automatically send you a check for your account balance. Spouses' rights apply to all full withdrawals of more than $3,500.
If your account balance is less than $200 (but at least $5) after you separate, the TSP will pay your account balance to you automatically, in a single payment. You cannot choose another withdrawal option or elect to leave your money in the TSP. If you choose to roll over these funds to a traditional IRA or eligible retirement plan, you have 60 days from the date you receive the payment to complete your rollover and preserve the tax-deferred status of these funds. For more information about rolling over your withdrawal, see the tax notice "Important Tax Information About Payments From Your TSP Account."
How do the rights of my spouse affect my withdrawal choice?
If you are a married participant and you are making a partial withdrawal, your spouse must give notarized consent to your withdrawal, regardless of the amount you are withdrawing or your account balance.
If you are a married participant and you are making a full withdrawal, spouses’ rights apply to your withdrawal choice only if your account balance is more than $3,500. Your spouse (including a legally separated spouse) has the right to the TSP's prescribed annuity unless your spouse waives his or her right to that annuity. The prescribed annuity is a joint and survivor annuity with a 50 percent survivor benefit, level payments, and no cash refund feature.
How do I request a withdrawal of my TSP account?
You can request either a partial or a full withdrawal through the Account Access section of this Web site. You can also use paper forms to make your request. If you would like to make a partial withdrawal, you can complete a paper request using Form TSP-U-77, Request for Partial Withdrawal When Separated; if you would like to make a full withdrawal of your account, complete Form TSP-U-70, Request for Full Withdrawal.
If you choose to use this Web site to request your withdrawal, you should be aware that you may not be able to complete your request online. For example, if you are married, you will not be able to complete your request for a partial withdrawal because you will need your spouse’s consent for that withdrawal. If you request a full withdrawal and your account balance is more than $3,500, your spouse must waive his or her right to the prescribed annuity. You will not be able to complete a request to transfer your withdrawal to an IRA or eligible employer plan because a transfer requires certification from your financial institution or plan. Also, for security reasons, you will not be able to request that your withdrawal payment be sent via EFT. However, if you use this Web site in these types of situations, you will be able to print out your partially completed form, obtain any necessary signatures, information, or documentation, and send the form to the TSP.
If you use a paper form, you can send your form to the TSP at the address on the form. Do not submit your withdrawal request to your service. Only the TSP can process a withdrawal request. After you leave the uniformed services, the TSP will be your primary contact for information about your account and about your withdrawal.
Where will my withdrawal be sent?>
Your withdrawal check will be mailed to you at the address in your TSP account record or to your IRA or eligible employer plan, if you elected a transfer. Or, if you prefer, a withdrawal payment may also be directly deposted into your checking or savings account electronically; i.e., by electronic funds transfer (EFT). EFT is a safer method of payment than issuing a check to you. Lost, stolen, damaged, or misdirected checks can take 6 weeks or longer to replace. Direct deposits will be made only to financial institutions in the United States.
If your address is not correct when you are separated, you can correct it through the Account Access section of the TSP Web site or by submitting a change of address (Form TSP-U-9) to the TSP. Alternatively, when you submit a withdrawal request, the address on your request will be used to update your TSP address of record.
When can I expect to receive my money?
Generally, it takes several weeks from the time the TSP receives all of your information until you (or your financial institution) receive the money for your withdrawal. You may get your money in less time if you can complete your request on this Web site. Also, if you choose to receive your withdrawal by EFT instead of by check, you may get your money sooner (but you will have had to submit a paper form to get the payment by EFT).
It could take longer to receive your money if your service has not notified the TSP of your separation from service or you have an outstanding TSP loan.
Can I withdraw my account if I rejoin the uniformed services or join the Federal civil service?
A separation from service for TSP purposes is at least 31 days. If you plan to rejoin the uniformed services or join the Federal civil service after 31 days, but you want to withdraw your account using one of the options for a separated participant, you must submit your completed withdrawal request to the TSP soon enough for your withdrawal to be paid before you return to the uniformed services or join Federal service. If your break in service is less than 31 full calendar days, you will not be eligible to withdraw your account as a separated TSP participant. However, in-service withdrawals are available under limited circumstances.
How will my TSP benefits be taxed?
Generally, all of the money from your TSP account paid directly to you (or to your checking or savings account via EFT) will be taxed as ordinary income for Federal tax purposes in the year (or years) in which you receive it. This is because your contributions to your TSP account are taken out of your pay before your Federal income tax withholding is computed and contributions are therefore not included as income on your Form W-2. Also, the earnings on your TSP account are not subject to Federal income tax while your money is in the TSP.
However, if you made any tax-exempt contributions to the TSP (i.e., contributions from pay subject to combat zone or qualified hazardous duty tax-exclusion pay), the portion of your withdrawal that represents the tax-exempt contributions will be exempt from tax. However, earnings attributable to tax-exempt contributions are taxable when withdrawn.
For example, suppose that over the course of your career you made $15,000 in ordinary contributions and $5,000 in contributions from tax-exempt pay received in a combat zone and that your total contributions earned $30,000 by the time of your withdrawal. In such a case, your account balance at the time of your withdrawal would be $50,000. The $45,000 of combined ordinary contributions and total earnings would be taxable, and the $5,000 in contributions from tax-exempt pay you received while serving in a combat zone would be exempt from tax.
The method you choose for receiving your withdrawal determines when you must pay the income tax. Because some withdrawal methods defer your receipt of the money from your account, your tax liability may also be deferred.
For detailed information about tax withholding requirements and the tax consequences of your withdrawal choice, read the TSP tax notice "Important Tax Information About Payments From Your TSP Account."
Can I change my withdrawal after I receive it?
Once your withdrawal has been processed, you cannot return it or change the withdrawal option. However, if you elected to receive all or a portion of your account in a series of monthly payments, you can change your election to a final single payment or change where your payments are being sent. Effective each January, you can change the fixed dollar amount you are receiving. You can also make a one-time change from TSP-computed monthly payments based on life expectancy to a fixed-dollar amount.
Use Form TSP-U-73, Change in Monthly Payments, to request a change in your monthly payments. You can change to a final single payment at any time; however, if you choose to change from TSP-computed payments to a specific dollar amount or change the dollar amount you are receiving, your Form TSP-U-73 must be received by the TSP by December 15 in order to be effective January 1 of the following year.
How long can I leave my money in the TSP?
If you do not want to withdraw your account when you leave the uniformed services, you can leave your entire account balance in the TSP. However, you must withdraw your entire balance (or begin receiving monthly payments from the TSP or from the TSP annuity vendor) by April 1 of the year following the year you turn 70½ (or following the year you separate, if you are already over age 70½ when you leave Federal service).
If you do not make a withdrawal by the required deadline, your TSP account must be paid to you in the form of an annuity, as required by law. If you do not provide the necessary information for the TSP to purchase an annuity for you (and your spouse, if applicable), or if you cannot be located, your account will be declared abandoned. You may later reclaim your account and make an appropriate withdrawal election; however, you will receive no earnings from the date your account was declared abandoned.
What are "required minimum distributions?"
If you have separated from service, the IRS requires that you receive a certain portion of your account balance beginning with the year in which you become age 70½. This portion, known as a "required minimum distribution," is based on your life expectancy. If you do not make a full withdrawal or begin monthly payments by the year in which you become 70½, the TSP must make the required distribution before April 1 of the following year. When you choose a withdrawal option, the TSP will determine whether you are required to have a portion of your account paid directly to you as a minimum distribution. The TSP will notify you and make any required minimum distribution payments to you as necessary.
The minimum distribution requirement applies only to participants who have separated from service. It does not apply to active employees, regardless of their age.
To learn more about the minimum distribution requirement, read the tax notice "Important Tax Information About Your TSP Withdrawal and Required Minimum Distributions."
What happens to my TSP account balance if I die?
If you die before your TSP account is completely withdrawn, the balance in your account will be distributed according to your most recent valid Designation of Beneficiary (Form TSP-U-3), if you completed one. (See "How do I designate beneficiaries for my TSP account?") If you did not file Form TSP-U-3, your account will be distributed according to the order of precedence required by law.
Your beneficiaries are entitled to your entire account balance after you die. However, if you die after the TSP purchases an annuity for you, your benefits will be provided according to the annuity option that you selected. If you die while you are receiving your account balance in a series of monthly payments, your beneficiaries will receive the balance of your account in a final single payment.
Payments made directly to spouses of deceased participants are subject to 20 percent mandatory Federal income tax withholding on all tax-deferred money that is being distributed. However, spouses of deceased participants can avoid the mandatory withholding and defer paying taxes on all or part of these payments by having the TSP transfer that money to a traditional IRA or eligible employer plan (including the spouse beneficiary's existing TSP account).
Spouses of deceased participants may also ask the TSP to transfer all or part of their payment(s) to a Roth IRA, if they meet the eligibility requirements. However, since Roth IRAs accept only after-tax dollars, the payment(s) will be subject to income tax incurred for the year of the transfer. To have benefit payments transferred to a traditional IRA, eligible employer plan, or Roth IRA, the spouse and the IRA or plan administrator must complete Form TSP-U-13-S, Spouse's Election of Payment Method.
Payments of tax-exempt money remain tax-exempt when they are distributed to the spouse beneficiary and are therefore not subject to the mandatory withholding. The tax-exempt portion is eligible to be transferred to an IRA or eligible employer plan; however, the IRA or plan must indicate on Form TSP-U-13-S that it will accept tax-exempt money. Note: The TSP does not accept transfers of tax-exempt money.
Payments to beneficiaries other than a spouse are subject to 10 percent withholding; this withholding is optional. Non-spouse TSP beneficiaries can also defer paying taxes by transferring their death benefit payments to an "inherited" IRA and, in most cases, by taking required minimum payments based on their own life expectancies. This eliminates the tax hit that many non-spouse beneficiaries were subject to before the Pension Protection Act of 2006 was passed. However, the rules governing "inherited" IRAs are complicated, particularly if the deceased participant was over age 70½. We suggest you discuss this benefit with your tax advisor or IRA provider.
In order for your account balance to be distributed after your death, Form TSP-U-17, Information Relating to Deceased Participant, must be submitted to the TSP with a copy of your certified death certificate.
To learn more about the taxation of payments made following the death of a TSP participant, read the TSP tax notice "Important Tax Information About TSP Death Benefit Payments."