Q. I am 68 years old and retired under Civil Service. Will I be penalized 20 percent if I withdraw my TSP funds in a single payment? Will the federal government withhold federal taxes on the funds before any penalties?
A. You will not be penalized for withdrawing your money. Federal tax may be withheld from your payment, however. See section 3 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf to determine what will be required.