New Changes for TSP Withdrawals

Since the 15th of September of this year, the Thrift Savings Plan has made some alterations to their regulations, which now make it much less complicated to withdraw money from the account than ever before. They have also made it a bit easier to be able to touch the funds in your TSP account.

Most of these alterations will have an impact on those who have left the government or military service, and for people already in retirement.

For those that are currently in the military, there was a change that will affect you. There was a regulation that was taken out, which limited the contributions you could make once you receive an in-service loan. In the past, if you received a hardship loan of some kind, there was a waiting phase of 6 months until you could invest money into your TSP account. As of the 15th, that is no longer the case, and you can make contributions to your TSP without a waiting period.

The greatest news of the TSP changes is how much easier it is to withdraw from the account.

In the past, you were just allowed to make one partial withdrawal that can be done once you left federal service. A lump-sum disbursement, a monthly payment, or an annuity payout were your available choices. Also, once an option was selected, it was pretty much impossible to change it over to another choice. This set up was very restrictive when it came to ways you could touch your money.

 

 

Since the recent changes, you can select whichever option for retirement and have an emergency back up plan, which entails withdrawing a large lump-sum. You can also adjust the monthly payment amount. You can also change the regularity of how often you get paid, which includes the options of yearly, every four months, or every month.

You can begin and cease these payouts whenever you wish to.

If you are at least 59 and 1/2 years of age or older and still serve in civil or military branches for the federal government, you are eligible to withdraw four times annually. Before, you were only allowed only one withdrawal during service.

Any withdrawals you make during your time in service will not hinder or take away any partial ones you make after separation. Before the change, when you took an age-based withdrawal during your federal service, you were not able to partially withdraw after you left the service.

With the new regulations passed, you have the choice to either withdraw from your traditional balance, Roth, or a mix between the two. Before the new changes, any money taken out had no option but to be proportional to your balance, which was known to cause frustration and hardship when the time for taxes came.

The IRS requires the minimum amount of money to be taken out of your TSP monthly, once you reach age 70.5. There are some complex rules regarding calculations on how much you must withdraw in order to avoid tax troubles.

Now, you don’t have to worry about it anymore. The TSP will automatically figure out the required minimum distribution amount and send it to you each year if you don’t make any plans.

Also, the last change to talk about is that the TSP has now allowed requests for withdrawals and other financial matters to be done online, like most things nowadays.