TSP and Combat Zone Pay

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By on April 18, 2018 in Pay & Benefits, Q&A with 0 Comments

Image of a metal piggy bank opened in the middle separating it into two parts and spilling coins out onto a solid white surface depicting withdrawing savings

Q.  I contributed to the Thrift Savings Plan from tax exempt combat zone pay. What will happen when I begin withdrawing money from the TSP?

A.  If you contributed to your TSP from your tax exempt combat zone pay, the portion of each TSP withdrawal that is based on that contribution will be free from income tax when you make a withdrawal. That amount will be noted on the Form 1099 you receive from the TSP.

If you chose a TSP annuity, the portion of your annuity that was based on your tax exempt contributions would be spread out over your life expectancy.

If you withdrew monies early from the TSP, the 10% early withdrawal penalty would not apply to the portion of the distribution that represented the tax exempt contributions.

Agencies can request to have John Grobe, or another of Federal Career Experts' qualified instructors, deliver a retirement or transition seminar to their employees. FCE instructors are not financial advisers and will not sell or recommend financial products to class participants. Agency Benefits Officers can contact John Grobe at [email protected] to discuss schedules and costs.

© 2019 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.


About the Author

John Grobe is President of Federal Career Experts, a consulting firm that specializes in federal retirement and career transition issues. He is also affiliated with TSP Safety Net. John retired from federal service after 25 years of progressively more responsible human resources positions. He is the author of Understanding the Federal Retirement Systems and Career Transition: A Guide for Federal Employees, both published by the Federal Management Institute. Federal Career Experts provides pre-retirement seminars for a wide variety of federal agencies.