How to Access Your TSP While Working

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By on May 15, 2019 in Pay & Benefits with 0 Comments
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Federal employees spend their entire working careers contributing to personal savings in what we call the accumulation phase. In this article, we will evaluate the ways you can access your TSP while working. We will discuss the rules associated with each type of withdrawal and how they could affect future withdrawals.

Each of the TSP loan options below are available on TSP.gov. Once you login, you will have access to each form.

Loan (TSP-20)

As a federal employee, you can borrow up to half the balance of your TSP while working, not to exceed $50,000. There are two types of loans:

  1. General Purpose loans must be paid back within five years. Documentation showing the purpose of this loan is not required.
  2. Residential loans must be paid back within a 15-year period. You must provide supporting documentation stating the costs that are associated with your purchase and/or construction of your primary residence. See Appendix II for details of the required documentation. Residential loans are used to purchase or make changes to a primary residence.

To apply for either a general purpose or residential loan, you should complete Form TSP-20 TSP Loan Application.

How TSP Loans are repaid

Payments (including interest) are deposited back into the traditional and Roth portions of the account, in the same manner the loan was disbursed. Your TSP loan payments will be invested back into the TSP account, according to your most recent contribution allocation.

TSP withholds $50 from the proceeds to cover administrative costs. This amount is deducted proportionately from your traditional and Roth accounts, if you have both. The fee is deducted from the total loan amount. For example, if you request to borrow $1,000, TSP will deduct a $50 fee, and the amount that you must repay will be $950 plus interest.

Financial Hardship (TSP-76)

A financial hardship may be taken at any age, must be applied for, and must be at least $1,000. You can have unlimited amounts of withdrawals, but each must be six months apart.

If a hardship is taken, you will not be allowed to contribute to TSP while working for at least six months. Plus, you will pay a 10% early withdrawal penalty if you are younger than 59.5. This penalty tax is in addition to the income tax you would ordinarily pay.

Age – Based (TSP-75)

If you are working for the federal government and over the age of 59.5, you can make a one-time in-service age-based withdrawal. Your withdrawal must be at least $1,000 or your entire vested account balance (even if it’s less than $1,000). You can still contribute to TSP and receive your match. This allows you to roll over your TSP into an Individual Retirement Account (IRA) or purchase a boat! Taxation will depend on what you do with your money.

Infographic showing the options federal employees have for accessing their Thrift Savings Plan (TSP) while working

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

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About the Author

Brandon Christy, CPA, PFS, is the founder and president of Retirement Benefits Institute, Inc. He is an established leader in contracted federal retirement benefits education, and his company has trained over 10,000 federal employees to help them gain clarity and confidence in retirement.

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