TSP Updates In-service Age 59.5 Withdrawal Rules

In 2024, the Thrift Savings Plan updated its rules for in-service withdrawals. There are two types of TSP in-service withdrawals, namely: (1) A financial hardship withdrawal and (2) An age-based (age 59.5) withdrawal.

This is the second of two columns discussing the updated rules for TSP participants who make in-service withdrawals and presents age-based (age 59.5) withdrawals. The first column discussed the rules regarding participants who make TSP financial hardship withdrawals.

SEE ALSO: TSP Updates Financial Hardship Withdrawal Rules

A TSP participant who is at least age 59.5 can make penalty-free withdrawals from his or her TSP account while still in federal service. The participant must pay income tax on the taxable portion of the participant’s withdrawal unless the participant directly rolls it over to a traditional IRA or to a qualified retirement plan.

TSP Rules for Making an Age-59.5 Withdrawal

The following rules apply to making an age-59.5 withdrawal:

• The TSP participant must be at least age 59.5. The TSP determines the participant’s age based on the participant’s date of birth as reported by the participant’s federal employing agency.

• A TSP participant can make up to four age 59.5 withdrawals per calendar year, with no more than one withdrawal in a 30-day period.

• A TSP participant can withdraw funds only in which he or she is fully vested, meaning the TSP participant is entitled to keep funds based on his or her years of service. In particular, being fully invested means a FERS-covered TSP participant is entitled to keep his or her agency’s automatic 1 percent (of the employee’s current year SF 50 salary) contributions and their earnings, after working in federal service for a certain number of years (usually a minimum three years). A TSP participant (a CSRS/CSRS Offset employee or a FERS employee) is always vested in his or her own contributions via payroll deduction and any accrued earnings. A FERS employee is always vested in any agency matching contributions and any accrued earnings.

• A TSP participant cannot withdraw directly from money invested in the TSP’s Mutual Fund window. The TSP participant must transfer that money to one or more of the TSP core funds before withdrawing it, and

• A TSP participant has a number of withdrawal options, depending on whether he or she has both traditional TSP and Roth TSP, or just one source. These withdrawal options are explained next.

A TSP Participant Has One Source (Traditional TSP Account or Roth TSP Account)

A TSP participant has the following withdrawal options: (1) Withdraw a specific dollar amount ($1,000 minimum) from the vested account balance, or (2) Withdraw the entire vested account balance.

TSP Participant Has Both a Traditional and a Roth TSP Account

A TSP participant has the following withdrawal options:

(1) Withdraw a specific dollar amount ($1,000 minimum) and request it come from only the traditional TSP account or the Roth TSP account;

(2) Withdraw all of the traditional TSP account; or

(3) Withdraw all of the Roth TSP account.

If a TSP participant chooses instead to withdraw money from both traditional TSP and the Roth TSP accounts, the withdrawal will have the same proportional amount of traditional TSP and Roth TSP funds. For example, if a TSP participant has a $100,000 vested TSP account balance, including $80,000 traditional TSP and $20,000 Roth TSP, the TSP participant can make a $10,000 withdrawal in which $8,000 will come from the traditional TSP and $2,000 will come from the Roth TSP.

• A TSP participant can make an age 59.5 withdrawal only from an account that is associated with the participant’s active employment. This means that a TSP participant with a uniformed services TSP account but who has left the uniformed services can only make an age-59.5 withdrawal from his or her civilian TSP account. If both of the participant’s accounts are associated with active employment; that is, the participant is currently a federal employee and a military reservist, then the rules explained here apply to each type of account separately.

• A TSP participant may be able to directly rollover all or part of age 59.5 withdrawals to a traditional IRA or to an eligible employer retirement plan.

Spouse’s Rights

The spouse of a married TSP participant has certain rights with regard to the participant’s in-service withdrawal. This is the case even if the TSP participant and spouse are separated. In particular, when a TSP participant requests an in-service withdrawal, the TSP participant must indicate whether or not he or she is married. If married, the following rules apply:

• FERS-covered employee. The law requires the employee’s spouse’s consent for an in-service age-59.5 withdrawal. If the spouse’s whereabouts are unknown, or if exceptional circumstances make it impossible to obtain the spouse’s signature, then the employee must contact the TSP in order to apply for an exception.

• CSRS-covered employee. The TSP must notify the spouse before the employee’s in-service age-59.5 withdrawal can be completed. If the spouse’s whereabouts are unknown then the employee must contact the TSP to apply for an exemption.

A summary of TSP in-service age-based 59.5 withdrawals is presented in the following table:

TSP In-Service Age 59.5 Withdrawal Rules

Applying for a TSP Age-59.5 Withdrawal

A TSP participant who is eligible to make a TSP age 59.5 withdrawal should first read the TSP booklet Tax Rules about TSP Payments. Once they are ready to request a withdrawal, they should log into MyAccount at www.tsp.gov to begin the request. They can also contact the TSP through one of the following ThriftLine options:

Phone: 1-877-968-3778 (U.S. toll free) or 1-404-233-4400 (outside the U.S., not toll-free)
7 a.m. – 9 p.m. Eastern time, Monday through Friday
Fax: 1-276-926-8948
Mail: ThriftLine Service Center
c/o Broadridge Processing
P.O. Box 1600
Newark, NJ 07101-1600