U = Uniformed Services

Financial Hardship In-Service Withdrawals

Know the Consequences

It is possible to take an in-service withdrawal from your TSP account to meet a financial hardship. But before you do, it's important to understand how it will affect your account.

It's a permanent withdrawal from your TSP account. You cannot put the money back. Furthermore, it reduces the amount of money that grows and generates compound earnings.

Your TSP contributions are suspended for 6 months. Be aware that this is 6 months of forgone retirement savings, tax deferral, and compound earnings. Also, your contributions will not automatically resume after the 6-month period; you will have to make a new contribution election.

Agency/Service Matching Contributions are suspended. If you are a FERS or BRS participant, you will not receive Agency/Service Matching Contributions again until you are eligible to resume contributions and you've completed another election form.

Tax Considerations

The TSP will withhold 10% on the taxable portion of your withdrawal for Federal income tax. You have the option of increasing or waiving this withholding.

The taxable portion of your withdrawal is subject to Federal income tax. The income will be taxed at your ordinary rate. Also, you may have to pay state income tax.

An additional IRS early withdrawal penalty of 10% may apply. If you are under the age of 59½, you may be subject to this additional tax.

Spousal Rights

If you are a FERS employee or a member of the uniformed services, a financial hardship withdrawal requires your spouse's notarized consent.

If you are a CSRS employee, a financial hardship withdrawal requires spouse notification.

More Information

For detailed information about financial hardship withdrawal eligibility and application rules, visit Financial Hardship In-Service Withdrawals. Also refer to the TSP booklet, In-Service Withdrawals.


Know the Consequences

A general purpose loan from your TSP account may be a viable option for dealing with an economic hardship. Before you consider a loan, be sure you understand how it affects your TSP account.

Loan Fee. The TSP charges a loan fee of $50 for administrative expenses. The TSP deducts the fee from your loan proceeds.

Interest. The interest rate on your TSP loan is the G Fund rate at the time your loan application is processed. This rate is fixed, so it will not change for the life of the loan. TSP loan interest is not tax-deductible but all of the interest you pay goes back into your TSP account.

Sacrificed earnings. When you take a TSP loan, you sacrifice the earnings that might have accrued on the borrowed money had it remained in your TSP account. Although you pay the loan amount back to your TSP account with interest, the amount of interest paid may be less than what you might have earned if the money had remained in your TSP account.

Tax Considerations

TSP will declare a taxable distribution on the entire unpaid balance of your loan plus accrued interest in the following situations:

  • If you fail to repay your loan according to your Loan Agreement.
  • If you miss loan payments and do not make them up within the allowed time period.
  • If you do not repay your loan when you separate from Federal service.
If you are under age 59½ when the taxable distribution is declared, you may also have to pay a 10% early withdrawal penalty on the taxable portion of the loan.

Spousal Rights

If you are a FERS employee or a member of the uniformed services, a TSP loan requires your spouse's signed notarized consent on the Loan Agreement.

If you are a CSRS employee, a TSP loan requires spouse notification.

Should You Consider a loan?

Depending on your circumstances, you may find that a loan is preferable to an in-service financial hardship withdrawal. Visit Choosing Between a TSP Loan and an In-Service Withdrawal to help you make that determination.

More Information

For detailed information about TSP loan eligibility and application rules, visit TSP Loans. Also refer to the TSP booklet, Loans.


The funds in your TSP account are held in trust for you by the TSP and, by law, are protected from the claims of creditors. Your TSP account cannot be garnished to pay debts.

TSP Loan Repayment

If you have a TSP loan, your payments must continue because, for bankruptcy purposes, the TSP loan is not a debt, and the TSP is not your creditor. Therefore, the bankruptcy court does not have jurisdiction over your TSP loan.

Chapter 7 and chapter 13 bankruptcy actions will not affect your obligation to repay a TSP loan. Therefore, under either type of bankruptcy, you must continue making loan payments as provided in your Loan Agreement.

Financial Hardship In-Service Withdrawal

A chapter 7 bankruptcy action does not affect your ability to obtain a financial hardship in-service withdrawal.

Under chapter 13 of the bankruptcy code, you are only eligible to receive a financial hardship in-service withdrawal if you have unpaid medical expenses, a casualty loss, or unpaid legal fees incurred for a separation or divorce.

More Information

For detailed information about the effect of a bankruptcy on your TSP account, see the TSP fact sheet, Bankruptcy Information.