What You Need to Know about TSP’s New Withdrawal Options
Most people participating in the Thrift Saving Plan have been asking about new withdrawal options for a while now. The demand for more options seems to have been heard, and now the agency that administers TSP has guaranteed participants that, new possibilities for withdrawing investments will be in place in about a year.
TSP partnered with the Securities and Exchange Commission in the annual world investor week to address some critical issues concerning the withdrawal options. Here is a list of five things that were brought forth and discussed with some clarity.
Expected availability of the TSP withdrawal options
According to the Federal Retirement Thrift Investment Board (FRTIB) which is the agency that administers TSP, new withdraw options should be available by September 2019. Earlier last November, President Donald Trump signed a TSP Modernization Act into law giving FRTIB approximately two years to implement new changes.
New withdrawal options
There have been remarkable changes however some rules like the 30-day limit remain unchanged. For instance, all TSP participants will be allowed to make one make one withdraw every 30 days. For those that are still in federal service and are aged 59.5 years and above will be permitted to make a maximum of four partial withdrawals in one calendar year. For participants no longer in federal service, there is no any other limitation apart from the 30-day one.
For those aged 591/2 and above and still in service are allowed to make one partial withdraw. There are new options for participants who have already left federal service where their post-separation withdraw enables them to take monthly, quarterly or annual installment payments. The new system also allows participants to request partial withdrawals while still receiving installment payments.
Currently, participants who have already left federal service are given up to age 701/2 years to make a full withdrawal or risk FRTIB abandoning the TSP account. The new system plans to eliminate the deadline by use of Required Minimum Distributions to pay the remaining balances of a participant’s TSP account.
There are more options to determine where payments come from
TSP participants usually get their payments from traditional, and Roth balances proportionally. With the new options, one will be allowed to choose one mode of payment.
What happens to those planning to retire before September 2019?
Participants who are planning to retire before September 2019 still get to enjoy the new withdrawal options by making a change to their post-separation payment structure or amount.
Change of withdrawal forms
There will be new withdrawal forms employed by TSP when the new system kicks in. The existing ones will be changed slightly to get synchronized with the new system. For separated participants, withdrawal forms should only be submitted once they’ve officially left federal service.
For married participants, their withdrawal forms are different and can be found in the TSP website. It is necessary to note that for such participants TSP requires to see notarized signatures from each partner on the form to avoid any inconveniences.
