TSP Withdrawal Options
After separation: single payment, installments (monthly/quarterly/annual), MetLife life annuity, or combination. While working: one age-59½ withdrawal + limited hardships. Biggest trap: rolling TSP to an IRA before 59½ kills the Age-55 Rule.
Reviewed by Jonathan Teplitsky · Updated June 2026
Four post-separation types
1. Single payment
Lump sum, partial or total. Taxable portion hits the year received. TSP withholds 20% federal unless direct-rolled.
2. Installment payments
Fixed dollar OR life-expectancy (TSP recalculates yearly via IRS Uniform Lifetime Table). Monthly/quarterly/annual. Change amount once/year. Balance stays invested.
3. Life annuity (MetLife)
Converts balance to guaranteed monthly check for life. Joint-life, cash-refund, 10-year-certain options. Rarely chosen — low rates and no inflation adjustment without expensive rider. Irreversible.
4. Combination
Lump sum + installments, or installments now + annuity later. Most common.
The Age-55 Rule — the TSP-only advantage
Separate from federal service in or after the calendar year you turn 55 → TSP withdrawals exempt from the 10% early-withdrawal penalty. LEO/FF/ATC: age drops to 50. TSP/401(k)-specific under IRC §72(t)(2)(A)(v). IRA equivalent doesn't exist — IRAs require 59½.
This matters enormously. A FERS employee who retires at 56 and rolls TSP to IRA the same week turned a penalty-free account into one with 10% surcharge before 59½. If you separated at or after 55 and might need TSP money before 59½, keep it in TSP.
In-service withdrawals
Age-59½
One in-service withdrawal per agency. No penalty, 20% withholding still applies. Often used to start Roth conversion ladder.
Hardship
Limited reasons: recurring negative cash flow, medical, casualty loss, divorce legal, eviction prevention. Documentation required. 10% penalty still applies unless 59½ or Age-55 Rule. Cannot roll to IRA.
Tax treatment
Traditional TSP: all withdrawals ordinary income. 20% federal withholding automatic on non-rollover.
Roth TSP: contributions always tax-free. Earnings tax-free if account 5+ years (from Jan 1 of first Roth contribution year) AND age 59½+/disabled/deceased. Otherwise earnings taxable + possible 10% penalty.
20% mandatory withholding does NOT apply to direct rollovers — request trustee-to-trustee, not 60-day indirect.
RMDs
Under SECURE Act 2.0:
- Age 73 if born 1951-1959
- Age 75 if born 1960+
TSP calculates via IRS Uniform Lifetime Table. First RMD by April 1 of year after RMD age. Missing triggers 25% excise tax (10% if corrected within 2 years). Starting 2024, Roth TSP balances are RMD-exempt while you're alive.
Rollovers
Direct to Traditional IRA
No tax/withholding, preserves deferral. Lose Age-55 Rule and G Fund 0.043% expense ratio.
Roth conversion
Convert Traditional TSP to Roth IRA. Taxable in conversion year. Strategic in low-income years (between retirement and SS/RMDs).
What you can never roll back in
Once money leaves TSP, you cannot move IRA money into TSP. One-way.
How to start
- Log into tsp.gov
- Open "Withdrawals and Changes to Installment Payments" wizard
- Choose distribution type
- Enter banking info (paper checks delay funding)
- Elect federal (20% default) + state withholding
- Submit. 7-10 business days to fund.
Reference: IRS Publication 575.