Q: I’m recently separated, keeping the house, and want to refinance in order to release my wife from the original mortgage. I do qualify to refinance, but am upside down by about $30,000. I’m a federal employee, and would have to take the $30,000 out of my TSP retirement account. If I make an early withdrawal from my TSP account that will be used solely for refinancing my home, will I still have to pay tax and the IRS early withdrawal penalty on the $30K?
A: None of the circumstances you mention will excuse you from the early withdrawal penalty. In fact, assuming that you’re under age 59 1/2, you will not have access to your account via withdrawal unless you can prove financial hardship. I suggest that you consider taking a loan from your TSP account instead.