|>||Are there any limitations on making withdrawals while still in service?|
|>||What are the rules for an age-based withdrawal?|
|>||What are the rules for a financial hardship withdrawal?|
|>||What is the cost of making a financial hardship in-service withdrawal?|
|>||Do spouses' rights affect my in-service withdrawal?|
|>||How do I request an in-service withdrawal?|
|>||Where will my withdrawal be sent?|
|>||When can I expect to receive my money?|
|>||How will my in-service withdrawal be taxed?|
|>||Back to Features Table of Contents|
The TSP is a long-term retirement savings plan that provides special tax advantages. Limitations on in-service withdrawals help ensure that retirement savings will be used for their intended purpose. Therefore, TSP participants who are still members of the uniformed services, including those employees in non-pay status, are limited to the following two types of in-service withdrawals:
When you make an in-service withdrawal, you cannot return or repay the money you remove from your account, so you permanently deplete your retirement savings and future earnings on the amount withdrawn. If you are in pay status, before making an in-service withdrawal you should evaluate your options to see if a TSP loan would be more beneficial. (See "TSP Loan Program.") If you have an outstanding TSP loan, making an in-service withdrawal will not eliminate the requirement to make loan payments. (Note: If you have tax-exempt money in your TSP account as a result of contributions from pay earned in a combat zone, when you make an in-service withdrawal, the money will be taken proportionally from the tax-deferred and the tax-exempt balances in your account.)
Although few uniformed services members will serve beyond age 59½, if you are an active member of the uniformed services at or after age 59½, you can make a one-time-only withdrawal of all or any portion of your vested account balance. (If you have a uniformed services and a civilian TSP account, you can only make an age-based withdrawal from the account(s) associated with your current employment. If you are in Federal service and the Ready Reserve, you can make an age-based withdrawal from each of your TSP accounts.) Your request must be for at least $1,000 or for your entire account balance (even if your balance is less than $1,000).
If you make an age-based withdrawal from a TSP account, you will not be eligible for a partial withdrawal from that account after you separate from service.
While you are an active member of the uniformed services, you may be able to withdraw your own contributions and earnings for a financial hardship. The amount of the financial hardship withdrawal is limited to your financial need. You cannot withdraw less than $1,000.
To be eligible for a financial hardship withdrawal, your financial need must result from at least one of the following four conditions: negative monthly cash flow, medical expenses (including household improvements needed for medical care), personal casualty losses, or legal expenses for separation or divorce.
To help you determine whether you have a negative monthly cash flow and the amount of the negative monthly cash flow, you can complete the worksheet that is provided with the Financial Hardship Withdrawal Request (Form TSP-U-76). To complete the worksheet, you will need to use financial information for yourself and, if you are married, your spouse. You will have to determine monthly income (i.e., from employment, child support, and alimony) and expenses (i.e., housing, utilities, dependent care, alimony and child support, and installment loan payments for loans other than TSP loans). The worksheet also provides factors to determine an allowance for ordinary household expenses based on income, as well as entertainment and other miscellaneous expenses. (Credit card payments are included in this allowance so they cannot be used in determining expenses.) You do not have to return the worksheet with your request for a financial hardship withdrawal.
Although you will not have to provide either income information or documentation to substantiate the financial hardship, you should retain this information and documentation for future reference because you will have to certify on Form TSP-U-76, under penalty of perjury, that you have a genuine financial hardship and what the reason for the financial hardship is.
After making a financial hardship withdrawal from your uniformed services account, you cannot contribute to that TSP account from any source of pay for 6 months. At the end of the 6-month period, your contributions will not resume automatically. You must make a contribution election on Form TSP-U-1 (or your service's electronic version) and file it with your service if you want to resume contributions. Your contributions will be allocated according to your most recent contribution allocation. You will be eligible to request another financial hardship withdrawal 6 months after your previous one.
The cost of making a financial hardship in-service withdrawal is significant. For example, you permanently deplete your retirement savings by the amount of the withdrawal plus any earnings you could have received on that amount, thus reducing your future retirement income. In addition, your withdrawal is subject to Federal income tax and, if you are less than age 59½ when you make your withdrawal, most likely an early withdrawal penalty tax. These costs are in addition to the cost of not being able to contribute to your TSP account for 6 months after your financial hardship in-service withdrawal is made. If you are eligible, this means that you will also not receive any matching contributions for that 6-month period. These are contributions that can never be recaptured for your retirement savings.
You should consider these costs before making a financial hardship in-service withdrawal. If you are in pay status and are eligible for a TSP loan, you may want to consider taking a loan instead.
Yes. If you are married, your spouse must give notarized consent to your in-service withdrawal. (See "Spouses' Rights.") These rights apply even if you are legally separated from your spouse.
Before you apply for an in-service withdrawal, read the booklet TSP In-Service Withdrawals. Use the Account Access section of this Web site or complete Form TSP-U-75, Age-Based In-Service Withdrawal Request, or Form TSP-U-76, Financial Hardship In-Service Withdrawal Request, depending on the type of withdrawal you are requesting. Both forms are available from this Web site or from the TSP.
If you have a pending application for another in-service withdrawal, or for a TSP loan, at the time your request is received, your request will not be accepted. Only one request for an in-service withdrawal or a loan is permitted at a time.
If you want to transfer all or any portion of an age-based in-service withdrawal to a traditional IRA, eligible employer plan, or Roth IRA have your IRA or plan complete the appropriate section of Form TSP-U-75. Financial hardship in-service withdrawals are not eligible to be transferred.
Your withdrawal check, including any correspondence related to your in-service withdrawal, will be mailed to you at the address in your TSP account record or, if you elected to transfer any portion of your age-based in-service withdrawal, to your IRA or eligible plan. (If your account record is not correct, contact your service TSP representative to have your correct address submitted to the TSP before you request the withdrawal). Or, if you are making a paper withdrawal request on Form TSP-U-75 or TSP-U-76, you may have your withdrawal payment directly deposited to 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. For security reasons, if you would like your withdrawal sent by EFT, you will not be able to complete your entire request on line. Direct deposits will be made only to financial institutions in the United States.
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 in-service 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 in-service withdrawal by EFT instead of by check, you may get your money sooner.
Age-based in-service withdrawal payments are considered "eligible rollover distributions" for Federal income tax purposes and, as such, are subject to mandatory 20 percent Federal income tax withholding. However, you can avoid withholding on all or any portion of an age-based in-service withdrawal payment by transferring the payment directly to a traditional IRA or eligible employer plan. If you transfer the payment to a Roth IRA, there will be no withholding, but you will still have to pay tax on the amount transferred for the year of the transfer because Roth IRAs do not accept tax-deferred money. Tax-exempt money can also be transferred to some IRAs or plans. However, certain restrictions apply.
A financial hardship in-service withdrawal is considered a non-periodic payment for Federal income tax purposes. The TSP will withhold ten percent for Federal income tax from such payments unless you submit an IRS Form W-4P, Withholding Certificate for Pension or Annuity Payments, requesting a different amount of withholding or a waiver of withholding. Form W-4P must be submitted to the TSP with your in-service withdrawal request. In addition, if you make a financial hardship in-service withdrawal before age 59½, you may be subject to a 10 percent early withdrawal penalty tax. This penalty tax is in addition to the ordinary income tax you will have to pay. (There will be no withholding on any portion of your withdrawal that comes from tax-exempt money (i.e., from combat zone contributions). Financial hardship in-service withdrawals are not eligible to be transferred.
For more detailed information about the tax rules affecting in-service withdrawals, read the TSP tax notice "Important Tax Information About Payments From Your TSP Account."