As your FERS retirement date grows near, it’s important to understand how your account is handled once the TSP receives notice of your separation from service. From processing withdrawal requests to rules about outstanding TSP loans, it’s important to know the facts so you can manage your TSP account accordingly.
When The TSP Receives Your Separation Notice
It can take up to 30 daysafter the date of your separation for the TSP to receive official notice from your agency. As a result you will not have immediate access to your funds during this time. Once the TSP receives notice, the “separation access” to your online account will be opened and you can make withdrawal requests. It’s important to note that any TSP loans you may have upon separating from service must be paid off within 90 days. An outstanding TSP loan will likely affect your withdrawal requests in addition to certain tax consequences.
“As of 2024, Roth TSP balances are no longer subject to RMDs.”
TSP Withdrawals (Distributions)
Your TSP distribution options in retirement include installment payments, a single payment or purchasing a life annuity. If your signature or your spouse’s signature is required for a withdrawal request, print out your request form, and send it back to the TSP (mail or fax) with the notarized signatures. The TSP may take another 60 days to process your first payment. For more information go to: TSP Withdrawals in Retirement.
Leaving Your Money In The TSP
You’re don’t have to make TSP withdrawals until you reach the age for Required Minimum Distributions (RMDs). You can leave your funds in your TSP when you separate from service and continue to accrue tax-deferred earnings but you won’t be able to make contributions. For the traditional TSP, the RMD age is now 73 for those born after December 31, 1950, and it will increase to 75 in 2033. As of 2024, Roth TSP balances are no longer subject to RMDs.
Transfers From Qualified Employer Accounts
After separating from service, you can still transfer (rollover) qualified funds into your TSP account from eligible employer-sponsored plans (excluding Roth IRAs). Note: beneficiary participants cannot transfer funds into the TSP. For details, read: Move Money Into The TSP.
Taxes On TSP Withdrawals
Typically, the TSP withholds part of the taxable portion of your distribution for federal income tax. Different withholding rates and rules apply to each type of TSP payment. For details, read: Tax Rules About TSP Payments.
To develop a strategy for managing your TSP in retirement, contact an FRC® trained advisor who understands how your TSP works.
Source: https://www.tsp.gov/
