TSP withdrawals

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Participants in the Federal Thrift Savings Plan (TSP) have two options for withdrawing from a TSP account after leaving federal service. Participants can take  as a partial withdrawal or a full withdrawal. Either type of withdrawal is now done on the TSP web site.

The Thrift Savings Plan has been described as "easily the best retirement plan in the country" by Bogleheads® author Allan Roth. Therefore, investors are cautioned to think carefully before closing their TSP which can be an irrevocable decision.

Withdrawal options
See: TSP Withdrawals at TSP.gov

See this article's Discussion tab for a discussion of withdrawals for non-Roth accounts.

Partial
Since the enactment of the TSP Modernization Act of 2017 on November 23, 2017, participants are no longer limited to a single partial withdrawal in their lifetime. Even while still employed, participants may make up to four withdrawals per year Withdrawals can be taken from Traditional balances only, Roth balances only, or pro rata from both.

Withdrawals are always distributed pro rata from the TSP funds, but this can be mitigated by doing an interfund transfer to restore the correct allocation. If you want to withdraw from the G fund only, you can make your withdrawal, which will take some amount from the stock funds, then do an interfund transfer to move money from the G fund back to the stock funds.

Full
Full withdrawals can be made as a Single Payment, Life Annuity, or as a Series of Monthly Payments, which can be a Specific Dollar Amount or based on Life Expectancy. Any combination of these three options may be used. If the payments are a Fixed Dollar Amount, the amount can be changed. If the payments are based on Life Expectancy, they can be stopped but not changed (although it should be possible to stop Life Expectancy payments and then start another withdrawal option).

Required Minimum Distribution
Required Minimum Distributions are required from the TSP under the same rules as for other employer plans :

"The Internal Revenue Code (IRC) requires that you begin receiving distributions from your account in the calendar year you become age 72 and are separated from federal service. Your entire TSP account—both traditional and Roth—is subject to these required minimum distributions (RMDs). If you have a civilian or uniformed services TSP account, we calculate RMDs using your age, your prior year-end account balance, and the IRS Uniform Lifetime Table."

"Any distributions you make while subject to RMDs will be used to satisfy the requirement. If the total amount of your distributions does not satisfy the requirement, we will issue a supplemental payment for the remaining amount before the deadline each year."

Roth TSP
As an employer sponsored retirement plan, the Roth TSP, like a Roth 401(k), has required minimum distributions. According to the TSP, "Required minimum distributions apply to both traditional and Roth balances and are paid proportionally from both balances." One of the many advantages of Roth IRAs is that they are not subject to RMD. Employer sponsored retirement plans like the Roth TSP and Roth 401(k)s, by contrast, do not enjoy that advantage unless they are rolled over to a Roth IRA. For TSP participants who expect to have significant Roth TSP balances, who would prefer not to withdraw from those balances, and who want to remain in the TSP, the decision to contribute to the Roth TSP should be reconsidered, since they will be required to take RMD's on any Roth balance. Alternatively, a full withdrawal of both Traditional and Roth contributions is possible. Or one could withdraw everything except for the minimum $200, putting the Roth TSP amount into a Roth IRA and the Traditional TSP amount into a Traditional IRA, and then transferring the Traditional IRA amount back into the TSP.

A qualified Roth 401(k) distribution is generally a distribution that is made after a 5-taxable-year period of participation and is either: When you roll over a distribution from a designated Roth account to a Roth IRA, the period that the rolled-over funds were in the designated Roth account does not count toward the 5-taxable-year period for determining qualified distributions from the Roth IRA. However, if you had contributed to any Roth IRA in a prior year, the 5-taxable-year period for determining qualified distributions from a Roth IRA is measured from the earlier contribution. So, if the earlier contribution was made more than 5 years ago and you are over 59 ½ a distribution of amounts attributable to a rollover contribution from a designated Roth account would be a qualified distribution from the Roth IRA. If you take a distribution from your designated Roth account before the end of the 5-taxable-year period, it is a nonqualified distribution. You must include the earnings portion of the nonqualified distribution in gross income. However, the basis (or contributions) portion of the nonqualified distribution is not included in gross income. The basis portion of the distribution is determined by multiplying the amount of the nonqualified distribution by the ratio of designated Roth contributions to the total designated Roth account balance. For example, if a nonqualified distribution of $5,000 is made from your designated Roth account when the account consists of $9,400 of designated Roth contributions and $600 of earnings, the distribution consists of $4,700 of designated Roth contributions (that are not includible in your gross income) and $300 of earnings (that are includible in your gross income). See FAQ's on Designated Roth Accounts, IRS.
 * 1) made on or after the date you attain age 59½
 * 2) made after your death, or
 * 3) attributable to your being disabled.