Early withdrawal penalty

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Q. I am a 52-year-old Postal Service employee and am seriously considering liquidating my TSP account. What are the penalties for this action? Would there be a less painful way to do this to lessen the amount of money I will lose?

A. The early withdrawal penalty is 10 percent of the gains in the account. The only way to avoid the penalty is to meet one of the exceptions listed on Page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.

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  1. Aside from the fact that you didn’t mention why you wish to liquidate your TSP account or that in most cases doing so is simply a very bad idea, you should wait unit you are separated from Federal service before doing so. At that time you should roll your TSP account into a traditional IRA (and not touch it until you need the money.) Doing so will save you the cost of any withdrawal penalty.

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