When you withdraw your retirement savings while you are still employed, the entire process of withdrawal revolves between you and the TSP, which consider withdrawals according to each business day. To do this, you need to log in to My Account, or you can also call ThiftLine to ask for the status of your saving withdrawal request. This will help you get information on the date; your funds will be disbursed. It is expected that the system will take ten days from the day the TSP receives your request to the day you receive the check.
But the situation is different when you recently retired from federal service and want to withdraw money from your savings to get some retirement income?
Most new-retirees try to delay their application for the TSP withdrawal until their final paycheck has been deposited, and they get paid for all unused annual leave. Some of them delay withdrawals and wait for the last working day of a post-retirement second career or part-time job. Many wait to take Required Minimum Distribution age of 72 (or 70 ½ if born before July 1, 1949.) According to the CARES Act, an individual does not need to withdraw from his or her TSP account in 2020 for RMD (no restriction of age or employment status). The TSP has planned not to send any RMD payments for 2020. If you are forced to withdraw in 2020, the TSP will delay federal taxes at the rate according to the type of withdrawal you have made without considering your contribution to the RMD. You are free to move to an IRA or any other employer plan.
Whatsoever your situation may be, once you have decided to take out money from your TSP account balance, you might start thinking, how long will it take to get the money? It can be just a few months since you retired, or maybe a few years. Then, the process of withdrawal will only be considered an in-service withdrawal process.
To withdraw money, you need to log on to My Account on the TSP website and check “Withdrawals and Changes to Installment Payments” links given on the menu. After doing this, you will get access to an online tool to start your withdrawal. The TSP has asked employees to provide at least ten days from the time they submit their withdrawal request to the time payment is sent. You will get a notification when your refund is disbursed.
According to Kim Weaver, the TSP director of external affairs, once-monthly payments are initiated, they are processed each month, but some holidays and other issues sometimes impact their routine work.
If you want your TSP account payments to coincide with your retirement, you must expect some delay between retirement and the time you raise your request to process your withdrawal request. This is the responsibility of your agency to notify you of the TSP of your separation. It’s generally advised that federal employees apply for retirement at least 30 days or up to 90 days before their pre-planned retirement date. It’s essential to check when the TSP has been notified that you’re all set to apply for a post-employment withdrawal from your savings account.
I recently got an email from a federal employee, Bill, who talked about his discussion with his human resources office about the time it took to send a post-retirement TSP withdrawal. He was informed that his agency takes between six to eight weeks to notify the TSP of an employee’s separation. (This differs from agency to agency. Usually, TSP takes up to 30 days after the actual date of termination for this information to submit it to the TSP.)
Many employees retire but may not feel the need to withdraw money from his or her TSP account, but if you want to create an immediate source of income, look for an in-service withdrawal option before taking retirement if you are retiring after 59 ½ of age.
Do you know you can also raise a request to get a loan from your TSP account? But you need to make loan payments before you take to retire, and you don’t need to pay back after you retire if you declare the unpaid balance as a taxable distribution. In this case, a $50 administrative fee is charged from your loan amount. And you get 90 days after the TSP receives the notification of your separation, so you get time to decide if you want to partially or fully pay back the loan and save it for later use. TSP withdrawal cannot be processed until your loan account has been closed (this can delay your money withdrawal by three months).