Question: What is the TSP-75 I hear people talk about at work?
I sometimes get asked this, but the question I get asked more is, “When can I begin withdrawing or roll over my TSP?”
These questions are pretty much the same.
When I talk about the TSP-75 with people I often get blank stares. People either know exactly what I’m referring to or have no idea what the TSP-75 is.
The TSP-75 is simply a form used to make an Age-Based In-Service Withdrawal Request.
What this means is you can make a withdrawal request from your Thrift Savings Plan because you’ve met the age requirements for the withdrawal without a penalty.
What age is that?
The almighty 59.5 years old.
There are people who have countdowns until this day, and for others they could care less.
In fact, there’s an entire website dedicated to this age that I find quite humorous.
Now, why did the IRS choose the age 59.5? I have no idea. The same question can be asked about why did the IRS choose the age 70.5 for RMD’s. I have a sneaking suspicion it’s to confuse people, but who knows.
What happens if I take a withdrawal before I turn 59.5?
This is a simple answer with a few caveats.
For the majority of you asking this question, the answer is you will be charged a 10% early withdrawal penalty tax, if you even qualify to make the withdraw.
For example, let’s say you decide to withdraw $1,000 before you turn 59.5 years old and haven’t met any of the requirements to be able to withdraw. On that $1,000 you will be charged a 10% early withdrawal penalty tax equating to $100.
That’s quite a bit to pay and is not something I ever suggest unless its a dire situation.
However, if you qualify for a Financial Hardship Withdrawal, you may be able to make the withdrawal, but will still most likely pay the 10% penalty (Click here to read more about those requirements.)
In-Service Withdrawal Basics
- When you take an in-service withdrawal, you cannot return or repay the money you remove from your TSP account. This is different from a loan and you permanently reduce your retirement savings by the amount of the withdrawal as well as any future earnings you could have accrued on that money.
- You will be subject to income taxes on your withdrawal except on any portion that consists of tax-exempt contributions, Roth contributions, or qualified Roth earnings. With a hardship withdrawal, you may also be subject to the IRS 10% early withdrawal penalty tax mentioned above.
- If you decide to take a financial hardship withdrawal, you will not be able to make contributions to your account for 6 months. THis also means if you are under the FERS retirement system, you will not receive any Agency Matching Contributions for 6 months. Obviously, this could add up to quite a bit of money.
- Spouse’s rights affect your in-service withdrawal. If you are a married FERS participant or a member of the uniformed services, your spouse must sign a consent waiver for your in-service withdrawal. Therefore, if your spouse doesn’t agree, the withdrawal may not be able to be made. If you are a married CSRS participant, the TSP must notify your spouse before the in-service withdrawal can be made. These rights apply even if you are legally separated from your spouse.
- Much of this information was taken from TSP.gov and can be found here.
– Cooper Mitchell