Thrift Savings Plan withdrawals


Q. I have 29 1/2 years in with the U.S. Postal Service. In February 2011, it will be 30 years and I will be 55. Can I withdraw all my TSP contributions then or do I have to wait to be a certain age? Also, is it taxed then? Any early penalties?

A. While you are still eligible to contribute the TSP through payroll deduction, you will have to wait until you reach age 59 ½ to withdraw money from your account (an age-based, in-service withdrawal), unless you can qualify for a financial hardship in-service withdrawal. If you have separated from covered service and you receive a TSP distribution before you reach age 59 ½, in addition to the regular income tax, you may have to pay an early withdrawal penalty tax equal to 10 percent of any taxable portion of the distribution not transferred or rolled over. The additional 10 percent tax generally does not apply to payments that are:

•  Paid after you separate from service during or after the year you reach age 55 (or the year you reach age 50 if you are a public safety employee as defined in IRC section 72(t)(10)(B)(ii));
•  Annuity payments;
•  Automatic enrollment refunds;
•  Made as a result of total and permanent disability;
•  Made because of death;
•  Made from a beneficiary participant account;
•  Made in a year you have deductible medical expenses that exceed 10% of your adjusted gross income (7.5% if you or your spouse is 65 or over); 
•  Ordered by a domestic relations court; or
•  Paid as substantially equal payments over your life expectancy.

The penalty tax does not apply to any portion of a TSP distribution (including a loan) which represents tax-exempt contributions from pay earned in a combat zone.

Relief from the 10 percent early withdrawal penalty is available to eligible Reservists called to duty for more than 179 days. The Reservist must have been activated after September 11, 2001, and must have received his or her TSP distribution between the date of the order or call and the close of the active duty period. The Reservist may also be eligible to repay the distribution to an IRA (not the TSP). Participants should consult with their tax advisors, legal assistance officers, or the IRS regarding this relief.

See the notice at for more information about the taxation of TSP distributions.


About Author

Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to and view his blog at

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