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  • Starting in January 2021, we’re making the process easier for participants. If you’re turning 50 or older and are eligible for catch-up, you’ll no longer need to make separate catch-up elections to your TSP account. To learn how to make these contributions next year, visit Catch-up contributions.

Alternatives to withdrawals

The following table compares how taking a TSP loan or making an in-service withdrawal would affect your account.

  Loan In-Service Withdrawal
Cost to Participant
  • $50 loan fee
  • No earnings on any outstanding loan amount
  • Retirement savings permanently reduced by amount of withdrawal
  • No future earnings on amount withdrawn
Effect on Taxes

None (unless loan is not paid back and we report a taxable distribution*)
  • Immediate tax liability (unless age-based withdrawal is transferred to an IRA or eligible employer plan)
  • Possible additional 10% early withdrawal penalty tax
Effect on Earnings No earnings on amount of loan until funds are repaid
  • No earnings on amount withdrawn

*When we report a taxable distribution, the Internal Revenue Service (IRS) considers the unpaid balance (including any accrued interest) of the loan to be taxable income.

For more information on each program, read TSP Loans and In-Service Withdrawals. These booklets are also available from your agency, service, or through the ThriftLine.