Changes to TSP Now Implemented

TSP millionaire by Bill Eager

Since the TSP Modernization Act of 2017, many TSP account holders have seen and heard news or notices about these changes coming to the Thrift Savings Plan. Since the 15th of September of this year, the new changes to withdrawal options have now been officially added to the system.

Here is the lowdown:

Once post-service from federal or military service, TSP participants are finally able to make unlimited partial withdrawals. For those that are still working for the federal government or in the military, and at least 59 and a half years old, they can take four in-service withdrawals annually.

With the previous rules, account holders were restricted to only one partial withdrawal.

As of now, partial withdrawals after separation can be unlimited but must be adhered to only being able to withdraw once every 30 days If you are receiving post-separation installment payments, you can still make partial withdrawals as well. And for those that are still in service, taking in-service withdrawals that are age-based will not hinder you from receiving partial withdrawals after separation from service.

Before the new rules, withdrawals were pulled from both your traditional TSP and Roth account in proportion to what was there. So if 75% of the TSP were in a traditional account and 25% in a Roth, all withdrawals made would pull 75% from the traditional and 25% from the Roth account.

Now, the account holder can select if they wish to only withdraw from only one of the accounts specifically, or they can use the previous process as well.

There also used to be a rule that made post-separated participants make a full withdrawal once 70 and a half years old. If this a decision was not made, the TSP account was labeled as abandoned, and legal matters would follow to make it legally binding.

Thankfully, for accounts that have already been abandoned, these accounts can be reactivated by the original participant without having to do a full withdrawal. The balance can stay in the TSP, but there will be a required minimum distribution that needs to be taken. These restored accounts are also eligible for the new withdrawal changes.

There is also a change where participants can select receiving monthly, quarterly, or once a year payments when they have left their federal post. In the past, only monthly payments were allowed in installments.

Beneficiary TSP participants who have an account have the same abilities as the original TSP account holders who were post-separation.

Because these changes are so drastic from the previous rules, participants may wish to contact their financial advisors or consultants to see what withdrawal options will be beneficial for their circumstances.

thrift savings plan

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