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Staying in the TSP

You can keep your money in the TSP if your account balance is $200 or more. You never have to make a withdrawal from your TSP account except for IRS required minimum distributions (RMDs), which begin once you’re 70 ½ years old and separated from service. And even if you don’t withdraw enough money to satisfy your RMD, we’ll automatically send you the necessary amount.

If you keep your money in the TSP, you’ll be able to:

  • Enjoy the TSP's low administrative expenses.
  • Move money into your account from an IRA or eligible employer plan.
  • Change your investment mix with interfund transfers.
  • Avoid paying current Federal income taxes on any taxable amounts (and possibly penalties).

Withdrawing from Your Account

There are several ways to withdraw money from your account after separating from service. You can

  • set up monthly, quarterly, or annual installment payments;
  • take single withdrawals whenever you need the money (no more than one every 30 calendar days), including if you’re currently receiving installment payments;
  • purchase a life annuity; or
  • use a combination of any of these methods.

You may also be eligible to transfer all or part of your withdrawal to an IRA or eligible employer plan.

Tax Considerations

Your decision has tax consequences:

  • You will owe taxes on the taxable amount of any payment you receive from your account. The taxable amount of any single withdrawal or installment payments lasting less than 10 years is subject to 20% Federal income tax withholding if not transferred to an IRA or eligible employer plan.
  • You may also have to pay a 10% early withdrawal penalty. However, if you separate from service during or after the year you reach age 55 (or the year you reach age 50 if you are a public safety employee as defined by section 72(t)(10)(B)(ii) of the Internal Revenue Code), then the 10% early withdrawal penalty tax does not apply.

Your To-Do List

There are four important things you must do: