Thrift Savings Plan (TSP)
The Thrift Savings Plan (TSP) is a retirement savings and investment plan for Federal Employees and uniformed service members. It offers you the same type of tax savings and benefits as private sector 401k plans. The Federal Retirement Thrift Investment Board acts as the plan administrator.
TSP Rollovers
TSP Withdrawals
TSP Loans
TSP Rollovers
Thrift Savings Plan Rollovers
Once eligible (either via Age-Based Withdrawal or separation from service), you can Rollover, or Transfer, your TSP funds into a Traditional IRA (or Roth IRA if you have contributed to the Roth portion of TSP).
TSP Rollover Benefits
A TSP Rollover offer your several advantages:
- Safety & Security: Eliminate risk. Protect your principal from market volatility.
- Income: Create a lifetime income stream without having to cash in your balance.
- Flexibility: Have the ability to remain in control of your funds and make changes when needed.
- Guarantees: Will not lose a dime due to market downturn, can choose guaranteed interest rate crediting strategy, & guaranteed income for life
- Growth Potential: Participate in the upside of the market without the risk of the downside.
TSP Withdrawals
Thrift Savings Plan Withdrawals
TSP Withdrawal Options
You may make three types of withdrawals from your TSP: In-Service withdrawals, Age-Based withdrawals and withdrawals upon Separation or Retirement.
In-Service Withdrawals:
- Can only be made by participants who are still employed by the Federal Government.
- Can only be made for two purposes: Age-based in-service withdrawals for participants who are older than 59 ½; Financial hardship in-service withdrawal for participants who can document hardship
- Cannot be repaid. Once you have made an in-service withdrawal, you cannot return or repay the money; your account balance is permanently reduced.
Age-Based Withdrawals:
You can make an age-based in-service withdrawal anytime after you reach age 59½ as long as you are actively employed in Federal service. The following conditions govern age-based withdrawals:
- You can only withdraw funds in which you are vested.
- Your withdrawal must be at least $1,000 or the entire amount of your account balance if it is less than $1,000.
- You may make up to four age-based withdrawals per year while you are actively employed in Federal service.
Withdrawals After Leaving Federal Service
When your service ends, you have essentially five withdrawal choices:
- Take a partial withdrawal. Separated federal employees are allowed unlimited partial withdrawals once separated. Each request must be at least 30 days apart.
- Withdraw all your funds: Funds will be subject to taxes and a tax penalty if you are under 59 ½ years old.
- Leave it in the TSP: You will no longer be able to make any contributions. You will continue to invest in the various TSP funds.
- Purchase the TSP Lifetime Annuity. TSP goes to MetLife and purchases a single premium immediate annuity (SPIA). Basically, you cash in your balance for a lifetime check. As a result, you no longer have any ownership or liquidity when it comes to your TSP balance.
- Take it with you: You can perform a TSP transfer or TSP rollover by rolling your funds into another qualified plan.
TSP Loans
Thrift Savings Plan Loans
TSP Loan Options – Borrowing Money From Your Account
You may make two types of loans from your TSP: General Purpose Loans & Residential Loans.
Can only be made by participants who are still employed by the Federal Government.
The amount of the loan regardless of type must be at least $1,000 and cannot exceed the amount of the federal employee’s own contributions plus earnings.
TSP-20 form is used for either loan option. Applications can also be completed at www.TSP.gov.
Generally, re-payments are made via payroll deduction.
General Purpose Loan:
Can be made for any purpose. No documentation is required.
Must be repaid with interest within 5 years.
Residential Loans:
May only be used for the purchase or construction of a primary residence.
This loan requires documentation.
Must be repaid within 15 years.
Taxable Distributions
TSP will declare your loan a taxable distribution on the entire unpaid balance in the following situations:
- Your loan is in default and you do not submit amount needed to bring your payments up to date
- You do not repay your loan in full by the max term limit
- You separate from federal service and do not repay the loan in full
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