TSP Withdrawal Rules: Taxes, Penalties, and RMDs

The Thrift Savings Plan withdrawal rules split cleanly along one line: whether you’re still working for the federal government or you’ve separated. While employed, your only options are an age-based withdrawal after 59½ or a hardship withdrawal for a qualifying emergency. After you leave, you can take single payments, set up installments, buy a life annuity, roll the money to an IRA or another employer plan, or mix these approaches. Taxes and penalties follow the same money in every case: traditional balances are taxed as ordinary income, qualified Roth withdrawals come out tax-free, and any distribution before age 59½ generally carries an extra 10% penalty unless a specific exception applies.

Withdrawals While You’re Still Working

Federal employees and service members have two in-service paths, and the difference between them is age.

Age-Based Withdrawals at 59½

Once you turn 59½, you can withdraw all or part of your vested balance without leaving your job. The TSP allows up to four age-based withdrawals per calendar year. Each one must be at least $1,000 unless you’re withdrawing your entire balance, or your entire traditional or Roth balance.¹

Financial Hardship Withdrawals Before 59½

If you’re not yet 59½ and have a genuine financial emergency, you can request a hardship withdrawal. You’ll certify under penalty of perjury that your need falls into one of five categories:²

Negative monthly cash flow, where recurring expenses exceed income.
Medical expenses for you, your spouse, or your dependents, including medically necessary home modifications.
Personal casualty losses from events like fire, flood, theft, or storms.
Legal fees and court costs for a separation or divorce. Child support, court-ordered spousal payments, and prepaid legal plans don’t qualify.
Losses from a FEMA-declared disaster, if your home or workplace sat in a designated individual-assistance area.

The withdrawal is capped at whatever is smaller: the amount you request, or the total of your own contributions plus their earnings. Agency matching and automatic contributions are off-limits.³ You don’t submit receipts with the request, but the TSP advises keeping documentation in case of an audit.⁴ A hardship withdrawal taken before 59½ is generally subject to the 10% early withdrawal penalty.

Post-Separation Withdrawal Options

Once you leave federal service, the full menu opens up. You can pick one method or combine them, and there’s no deadline to start; you can stay invested until required minimum distributions eventually force the issue.⁵

Single Payments

Take a one-time withdrawal of all or part of your account. Partial distributions must be at least $1,000. Payment can go directly to you, roll over into an IRA or another eligible plan such as a 401(k), 403(b), or governmental 457(b), or split across multiple destinations.⁶

Installment Payments

Set up recurring payments monthly, quarterly, or annually. You can choose a fixed dollar amount, or let the TSP calculate a payment from IRS life-expectancy tables that it recalculates each year. Installments can be stopped, restarted, or changed at any time through the online portal or the ThriftLine.⁷

Life Annuity

You can use part or all of your balance to buy a life annuity from the TSP’s contracted insurance provider. It pays a monthly income for life. The trade-off is permanence: the money leaves your TSP account and the purchase cannot be reversed. Options include single life, joint life with your spouse (100% or 50% survivor benefit), joint life with someone other than your spouse, and add-on features like a cash refund to a beneficiary or a ten-year certain guarantee.⁸ The monthly amount depends on your balance, the annuity type, your age, and interest rates at purchase.

How TSP Withdrawals Are Taxed

The tax treatment splits by which balance the money comes from.

Traditional Balance

Withdrawals from your traditional balance are ordinary income in the year you receive them. The TSP withholds federal income tax from the taxable portion. You can generally adjust the withholding percentage when you submit the request, though some payment types have mandatory rates.⁹

Roth Balance

Your Roth contributions come out tax-free because you already paid tax on them. The earnings are also tax-free, but only if the distribution is qualified. Two conditions have to be met: at least five years must have passed since January 1 of the year of your first Roth TSP contribution, and you must be at least 59½, permanently disabled, or deceased.¹⁰ If either condition fails, the earnings portion is taxable.

Rollovers

A direct rollover moves your balance into an IRA or another eligible plan without it passing through your hands, and no tax is owed at the time of the transfer. If you take a check instead and plan to roll it over yourself, you have 60 days to deposit the funds into an eligible plan. Miss that window and the entire amount becomes taxable income for the year.

Roth TSP money can only be rolled into a Roth IRA or another plan’s Roth account. Traditional TSP money can go to a traditional IRA, a Roth IRA (with taxes owed on the converted amount that year), or another employer plan that accepts rollovers.⁶ Note that the TSP won’t accept indirect rollovers of Roth funds coming in from other plans; those have to be direct.¹¹

The 10% Early Withdrawal Penalty and Its Exceptions

If you take a TSP distribution before age 59½, the IRS generally imposes an additional 10% tax on the taxable portion, on top of ordinary income tax. It applies to most in-service hardship withdrawals and to post-separation withdrawals taken before that age. Several exceptions remove the penalty:¹²

Separation at 55 or older. If you leave federal service during or after the calendar year you turn 55, TSP withdrawals are penalty-free. This is often called the Rule of 55.¹³
Public safety employees at 50. Federal law enforcement officers, firefighters, customs and border protection officers, air traffic controllers, and corrections officers get the same treatment if they separate during or after the year they turn 50.
Total and permanent disability.
Payments to beneficiaries after the participant’s death.
A series of substantially equal periodic payments over your life expectancy.
Up to $5,000 within one year of a birth or qualified adoption.
Up to $1,000 per calendar year for emergency personal expenses.
Up to $10,000, or 50% of the vested balance if less, within one year of domestic abuse.
Distributions to a terminally ill participant.
Qualified disaster recovery distributions for federally declared disasters.
Payments made under a domestic relations court order.

For uniformed service members, the penalty doesn’t apply to the tax-exempt portion of contributions made from combat zone pay. Reservists called to active duty for more than 179 days may also qualify for penalty relief on distributions taken during that active duty period.¹²

Required Minimum Distributions

You can’t leave money in a tax-deferred account forever. Federal law requires you to begin taking required minimum distributions at a certain age. Under the SECURE 2.0 Act, that age is 73 if you were born between 1951 and 1959, and 75 if you were born in 1960 or later.¹⁴ Under Internal Revenue Code Section 401(a)(9), the rules apply whether you’re still working or already separated.¹⁵

If you don’t withdraw enough to satisfy the requirement, the IRS charges a 25% excise tax on the shortfall. That drops to 10% if you correct it within two years.¹⁶ The TSP calculates RMD amounts automatically for participants who haven’t already met the requirement through voluntary withdrawals.

Outstanding TSP Loans at Separation

If you leave federal service with an unpaid TSP loan, this is where people get hit. You can keep paying by check, guaranteed funds, or loan direct debit after you separate. But if you don’t start repaying by the deadline the TSP sets, the entire outstanding balance plus accrued interest is declared a loan offset and reported to the IRS as taxable income for that year.¹⁷ The same result follows if you begin post-separation payments and then miss one without curing it in time.

A loan offset isn’t just a tax bill. If you’re under 59½ and no penalty exception applies, you’ll also owe the 10% early withdrawal penalty on the taxable amount. Check your loan balance and the repayment timeline before you separate.

Spousal Consent

Your spouse’s rights depend on which retirement system covers you, and this trips up more participants than almost any other requirement.

If you’re a FERS or uniformed services participant, your spouse has a legal right to a joint and survivor annuity with a 50% survivor benefit, level payments, and no cash refund, covering your entire account. To pick any other withdrawal option, whether a lump sum, installments, or a different annuity type, your spouse has to sign the request and waive that annuity right. The requirement applies to total and partial distributions and to any change in installment amount or frequency.¹⁸ The signature typically has to be notarized.

If you’re a CSRS participant, your spouse has no consent right, but must be notified when you apply for a withdrawal.¹⁹ Limited exceptions to the consent requirement exist, for instance when the spouse’s whereabouts are unknown, but they require approval from the TSP’s Executive Director.

When the TSP Freezes Your Account

A few legal proceedings can freeze your account entirely, blocking withdrawals until the matter is resolved. When the TSP receives what appears to be a qualifying retirement benefits court order, typically during a divorce, the account is frozen immediately. No withdrawals or loan disbursements are allowed while the freeze is in place, with the sole exception of required minimum distributions. The freeze lifts once the order is processed and any payment made, or if the court vacates the order.²⁰

An IRS tax levy or criminal restitution order also triggers a freeze. Contributions and loan repayments continue, but no money comes out until the obligation is satisfied.²¹

Submitting a Withdrawal Request

All TSP withdrawal requests go through the My Account portal at tsp.gov. Paper forms are no longer required.²² The system walks you through your financial information, withdrawal type, and destination for the funds.

Have this ready before you start:

Routing and account numbers for direct deposit. A new payment destination has to be on file for at least seven days before receiving funds.⁹
Your federal tax withholding preference for the taxable portion.
Your spouse’s notarized signature if you’re married and covered by FERS or the uniformed services.
The receiving institution’s name, address, and account number if you’re rolling funds over.

Once submitted, you can track status through the online portal. Payment goes by direct deposit or mailed check, and a confirmation notice is sent to your address on record when payment is authorized.

1
eCFR. 5 CFR 1650.31 – Age-based withdrawals
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eCFR. 5 CFR 1650.32 – Financial hardship withdrawals
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eCFR. 5 CFR 1650.32 – Financial hardship withdrawals
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Thrift Savings Plan. Withdrawals In-Service
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Thrift Savings Plan. Withdrawals in Retirement
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Thrift Savings Plan. Rollovers from the Thrift Savings Plan to Eligible Retirement Plans
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Thrift Savings Plan. Installments Total and Partial Distributions Life Annuities
8
Thrift Savings Plan. Annuities
9
Thrift Savings Plan. Taking Money From Your Account
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Thrift Savings Plan. Traditional and Roth TSP Contributions
11
eCFR. 5 CFR 1600.31 – Methods for Rolling Over Eligible Rollover Distribution to the TSP
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Thrift Savings Plan. Tax Rules About TSP Payments
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Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
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Congress.gov. Required Minimum Distribution (RMD) Rules for Original Owners
15
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
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Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs)
17
eCFR. 5 CFR Part 1655 – Loan Program
18
eCFR. 5 CFR 1650.61 – Spousal Rights Applicable to Post-Employment Withdrawals
19
eCFR. 5 CFR Part 1650 Subpart G – Spousal Rights
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eCFR. 5 CFR 1653.3 – Processing Retirement Benefits Court Orders
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eCFR. 5 CFR 1653.34 – Processing Federal Tax Levies and Criminal Restitution Orders
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Thrift Savings Plan. Forms and Resources