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TSP Flexible Withdrawals

Exciting changes to the Tax Savings Plan (TSP) closely aligns it with the withdrawal options of 401(k) type plans.


The TSP Modernization Act (PL 115-84 brings the following changes:

 

  • Multiple age-based (for those 59½ or older) in-service and post-separation partial withdrawals will be allowed.  

  • You’ll be able to choose whether your withdrawal should come from your Roth balance, your traditional balance, or a proportional mix of both.  

  • You will no longer be required to make a full withdrawal election after you turn 70½ and are separated.

    • Tax Note: You will still need to receive IRS required minimum distributions (RMDs).

  • If you're a separated participant, in addition to the option of monthly payments, you’ll be able to choose quarterly or annual payments, and you’ll be able stop, start, or make changes to your installment payments at any time.

 

The GREAT NEWS!

 

Questions:
If I’ve already begun receiving monthly payments from my TSP account, or elect to begin receiving payments before the new rules are implemented, will the additional withdrawal options be available to me?

How about if I’ve already taken a partial withdrawal (either in-service or postseparation) before the changes take place?

 

Will that prevent me from being able to take additional ones later?

 

Answers:

If you have an account balance when the new rules go into effect, even if you’ve begun receiving monthly payments or have taken a partial withdrawal before then, you will be able to take advantage of the new withdrawal options. Get Detailed Questions and Answers about Changes to TSP Withdrawal Options

 

 

Note that, as is currently the case, if you are receiving monthly payments and elect to make a change that affects the duration of your payments, there may be tax consequences.

 

For more information, see the TSP tax notice Important Tax Information about Payments from Your TSP Account.