How to Withdraw Money From TSP After Separation

To withdraw money from your TSP after separation, wait until your former agency reports your separation to the Thrift Savings Plan (usually two to four weeks after your final paycheck), resolve any outstanding TSP loan, then log into My Account at tsp.gov and request the distribution.¹ You can take the money as a lump sum, partial withdrawals, scheduled installments, a life annuity, or any combination. What it costs you in taxes and penalties depends on your age at separation and whether you roll the money into another retirement account.

Wait for Your Separation to Post

The withdrawal tools in My Account only appear once your record shows you as separated. Your former agency or service branch sends that update when it processes your final paycheck, typically within two to four weeks of your last day.¹ Log into the My Account portal at tsp.gov to check your status. Access requires multifactor authentication through a one-time passcode sent by text, phone call, or the Okta Verify app.²

If more than a month has passed and you’re still marked active, call your former agency’s HR office. The TSP cannot change your status on its own; only the reporting agency can fix it.

Resolve Any Outstanding TSP Loan First

An outstanding TSP loan blocks your withdrawal completely. The system will not let you begin the process until the loan is dealt with.¹ After your separation posts, you have three ways to clear it:

Pay off the remaining balance and accrued interest in full before the deadline.
Keep making monthly payments through checks, money orders, or recurring direct debits.
Do nothing and let it foreclose. If no payments come in within 90 days of your reported separation, the TSP forecloses the loan. The outstanding balance plus accrued interest is reported to the IRS as taxable income for that year, and a foreclosed loan cannot be undone or repaid.³⁴

Foreclosure can also trigger the 10% early withdrawal penalty if you’re under 59½, which makes ignoring the loan much more expensive than most people expect. If you separated during or after the year you turned 55 (or 50 for qualifying public safety employees), the penalty exception described below may cover the foreclosed amount, but the income tax still applies.

Your Four Withdrawal Choices

Once your record shows separated and any loan is resolved, you pick from four basic methods. Combining them is allowed. You could take a partial lump sum now, start installments for a chunk of the balance, and leave the rest invested.

Full or Partial Lump Sum

A full withdrawal empties and closes your account. A partial withdrawal pulls out a specific dollar amount while the rest stays invested in the funds you’ve selected. Each partial withdrawal must be at least $1,000, and there’s no cap on how many you can request.⁵

Installment Payments

You can set up monthly, quarterly, or annual payments. Two calculation methods are available: a fixed dollar amount you pick (say, $2,000 a month until the balance runs out), or a life-expectancy-based amount that the TSP recalculates each year using IRS mortality tables and your remaining balance.⁶ You can change the amount, change the frequency, or stop installments entirely at any time.⁵

Life Annuity

Buying a life annuity moves your money permanently out of the TSP and into a contract with the TSP’s annuity vendor, which then pays you for life.⁷ Options include a single-life annuity (payments stop at your death) and a joint-life annuity with your spouse (payments continue to the survivor), with level or increasing payments and add-ons like a cash refund or a ten-year guaranteed payment period. An annuity fits if you want fully predictable income and are willing to give up control of the underlying funds. It is irreversible.

Leave It Where It Is

You don’t have to withdraw anything right away. The TSP lets you keep your account open indefinitely after separation as long as your vested balance is at least $200.⁸ If the balance falls below that threshold, the TSP will automatically disburse the funds. Money left in the plan keeps growing tax-deferred and stays in the TSP’s low-cost index funds, which is worth weighing against the reasons you might want to move it.

What the Withdrawal Will Cost in Tax

Traditional Balance and the 20% Withholding

When the TSP sends money directly to you instead of rolling it into another retirement account, it withholds 20% for federal income tax. There are no exceptions to this on taxable distributions paid to you.⁹ That 20% is a prepayment toward your actual tax bill, not the final amount. If your overall income puts you in a higher bracket, you’ll owe more at filing time; if 20% was too much, you get a refund. Traditional TSP contributions went in pre-tax, so every dollar you withdraw is taxable income.

A direct rollover to an IRA or another employer’s plan avoids the 20% withholding entirely because the money never touches your hands.⁹ With an indirect rollover, where the TSP sends you a check and you redeposit it within 60 days, the 20% withholding still comes out. To roll over the full pre-tax amount, you’d have to make up that 20% from other savings.

Roth TSP Withdrawals

Roth contributions came from after-tax dollars, so your contributions always come out tax-free. The earnings on Roth contributions are also tax-free if two conditions are met: at least five years have passed since January 1 of the year you made your first Roth TSP contribution, and you’re at least 59½, permanently disabled, or deceased.⁹ Withdraw Roth money before meeting both conditions and the earnings portion gets taxed as ordinary income.¹⁰

State Tax

The TSP does not withhold state or local income taxes from any distribution.⁹ It does report every payment to your state of residence if that state has an income tax. Some states exempt retirement income partially or fully; others tax it like any other income. Check with your state tax agency before assuming nothing is owed.

The 10% Early Withdrawal Penalty and How to Avoid It

Withdrawals before age 59½ from a traditional TSP balance generally trigger a 10% additional tax on top of ordinary income tax.¹¹ On a $100,000 withdrawal, that alone is $10,000, before your regular tax rate. Several exceptions apply specifically to separated federal employees:

Separate during or after the calendar year you turn 55, and the 10% penalty does not apply to TSP distributions. This is one of the TSP’s biggest advantages over an IRA. Roll your TSP into an IRA and then withdraw before 59½, and you lose this exception.¹²
Federal law enforcement officers, firefighters, customs and border protection officers, air traffic controllers, and nuclear materials couriers can use the exception if they separate during or after the year they turn 50.¹³
Under SECURE Act 2.0, public safety employees with at least 25 years of federal service in a TSP-eligible position qualify for the exception regardless of age.¹⁴
A direct rollover to an IRA or another employer plan defers all taxation, penalty included, because no distribution has occurred.

The age 55 rule is specific to the TSP (and other employer plans). It does not apply to IRA withdrawals. People who roll their entire TSP into an IRA before 59½ and then need the money often learn this too late. If there’s any chance you’ll need penalty-free access to these funds before 59½, keeping at least that portion in the TSP is worth serious thought.

Submitting the Request Through My Account

Log into My Account at tsp.gov and go to the withdrawals and changes in installment payments section. The system walks you through choosing your method, specifying the amount, and telling the TSP where to send the money: your bank account, a rollover destination, or a mix.

If you’re covered under FERS or the uniformed services retirement system, your spouse has a legal right to consent to certain withdrawal types. A full account withdrawal requires a notarized spousal consent form regardless of account balance. Have your spouse’s contact information and Social Security number ready. Notary fees typically run $5 to $15 per signature and vary by state. You upload the notarized form directly through the portal.

You’ll also need your bank’s routing number and account number for direct deposit. The TSP can only send electronic transfers to financial institutions in the United States.⁵ If you hold both a civilian and a uniformed services account, each requires its own request.

Before submitting, the system shows a summary of your selections. Review it carefully. Once processed, a withdrawal cannot be reversed and funds cannot be returned to the TSP.⁵ After submission, a confirmation lands in your secure message inbox, and you can watch progress under the Activity tab.

Processing usually takes up to 10 business days from when the TSP has your complete request and supporting documents.¹⁵ Direct deposit is faster than a mailed check and avoids the risk of a lost payment.

Changing Your Mind

You can cancel a submitted withdrawal only if the TSP has not yet processed it. Requests entered by noon Eastern time process that same business day; requests entered after noon process the following business day. Once processing completes, the withdrawal is final. Installment payments are more flexible; you can change the amount, change the frequency, or stop them at any time without closing the account.⁵

If You’re Near 73: Required Minimum Distributions

Once you reach age 73, the IRS requires you to start withdrawing a minimum amount each year from your traditional TSP balance, whether you need the money or not.¹⁶ Required minimum distributions are calculated from your account balance and life expectancy tables. The TSP will compute and send your RMD automatically if you haven’t already withdrawn enough for the year.

Missing an RMD carries a 25% excise tax on the amount you should have taken, dropping to 10% if you correct the shortfall within the timeframe the IRS allows.⁹ If your former agency is slow to report your separation and you’re near 73, that delay can push your RMD past its deadline, so stay on top of the agency’s reporting timeline.

Update Your Beneficiary If You’re Leaving Money Behind

If you plan to keep a balance in the TSP after separation, confirm your beneficiary designation is current. Without a valid designation on file, the account follows a statutory order of precedence: spouse first, then children equally, then parents, then the estate’s executor, and finally next of kin under your state’s laws.¹⁷ A will, prenuptial agreement, or divorce decree does not override that order. The only way to control who inherits your TSP is by filing a beneficiary designation through your TSP account. A surviving spouse who inherits TSP funds receives a beneficiary participant account and can either leave the money invested in the TSP or roll it into their own IRA or employer plan.¹⁸

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