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Remember—TSP Withdrawal Changes Happen This Year


The Federal Retirement Thrift Investment Board is planning a “significant launch promotion” beginning this month to implement the Thrift Savings Plan changes stemming from the TSP Modernization Act. Congress imposed a deadline for these changes of November 1st, but the Board plans to implement them on October 1st.

Below is a summary of changes participants can expect.

Post-Separation Withdrawals

TSP participants will be able to make more than 2 post-separation withdrawals. Until the implementation date, separated participants can only make one partial withdrawal and one final withdrawal. Further, if the participant took an age-based withdrawal while employed, they can only take the final withdrawal.

When the changes are implemented, there won’t be a limit on the number of post-separation partial withdrawal if they aren’t taken more than once every 30 days. Taking an age-based withdrawal while employed won’t hurt separated participants from taking post-separation partial withdrawals.

Age-Based Withdrawals

Participants still employed will be able to take up to 4 age-based in-service withdrawals as long as they meet the age requirement (59 ½).

Installment Payments

Currently, the only way to take installment payments from TSP is on a monthly basis. The payments can be changed only once a year and can never be stopped. After implementation, quarterly and annual installment payments will be allowed. The amount of the payments can be changed and more often and they can be stopped or started.

Installment payments will no longer hinder a separated participant from taking a partial withdrawal. Those participants will also no longer be required to make a “full withdrawal election” by the age of 70 ½. However, they still must begin taking required minimum distributions from TSP by April 1st of the year after the year in which they reach 70 ½. This could be done by taking a partial distribution or by setting up installment payments.

These changes are beneficial to TSP participants. It’s important to know about them in order to take full advantage of them.