After you leave federal service you can take TSP money as partial withdrawals, installment payments, a life annuity, a rollover, or a mix; traditional money is taxed as income, and withdrawals before age 59 and a half can carry a 10 percent IRS penalty unless you separated in or after the year you turned 55 (50 for special provision employees).
You spent a career building your TSP. Now comes the part nobody trains you for: taking it out. The questions pile up fast. How much tax? Is there a penalty if I retire at 56? Do I have to take it all at once? What is an RMD and why does the IRS care?
Here is the reassuring part. The TSP does not force you to do anything on the day you retire. Your money stays invested in the same funds until you ask for it. Withdrawals are a set of tools, not a one-time verdict, and you can usually combine them.
Think of your TSP in retirement as a reservoir rather than a bucket. You decide how fast the tap runs, and the rules below are the pipes and valves: some open at certain ages, some cost tax when they open, and one (required minimum distributions) eventually turns on by itself.
This guide covers withdrawals while you are still working, your options after separation, the tax and penalty rules, required minimum distributions and rollovers. It is general education from FFEBA, an education organization, and not tax or investment advice for your situation.
01What are my TSP withdrawal options after I leave federal service?
Once you separate, you can leave the money in the TSP, take partial withdrawals, set up installment payments, buy a life annuity, roll money to an IRA or another plan, or combine these (TSP, retrieved 2026-07-05). You do not have to choose just one.
- Leave it in the TSPYour balance stays invested and you can still move it between funds. You cannot add new payroll contributions, but you can roll money in from eligible plans.
- Partial withdrawalA single payment of an amount you choose. You can take more than one over time.
- Installment paymentsA stream of monthly, quarterly or annual payments in an amount you choose. You can change the amount or stop and restart the payments.
- Life annuityYou use part or all of the balance to buy a lifetime income stream through the TSP's annuity provider. Once purchased, the decision cannot be reversed.
- Full withdrawalThe whole balance at once, in cash, as a rollover, or a mix of the two.
- Mixed withdrawalA combination, such as part annuity and part installments.
Since a 2019 overhaul of TSP withdrawal rules, participants have had much more flexibility to take money in pieces and change payment amounts, rather than making one irrevocable choice at retirement.
You also choose where each withdrawal comes from: your traditional balance, your Roth balance, or both in proportion. That choice changes your tax bill, which is why the Roth TSP guide is worth reading before your first payout.
02Can I withdraw from my TSP while I am still working?
Yes, in two situations: an age-based withdrawal once you reach 59 and a half, or a financial hardship withdrawal at any age. Both reduce your retirement savings permanently, because in-service withdrawals cannot be paid back.
- Age-based (59 and a half) withdrawals. Available from vested money while you are still employed, with a limit on how many you can take each calendar year (Department of the Interior in-service withdrawal training, retrieved 2026-10-11). No 10 percent penalty applies at this age, but traditional money is still taxed.
- Financial hardship withdrawals. Limited to your own contributions and their earnings, and only for qualifying hardships such as recurring negative cash flow, medical expenses, casualty losses or legal expenses related to divorce. The money is taxable and can carry the 10 percent penalty if you are under 59 and a half.
- Loans instead of withdrawals. If you need cash while working, a TSP loan is paid back to your own account. Our TSP loan guide covers the trade-offs.
03What is the TSP early withdrawal penalty?
The IRS adds a 10 percent additional tax to the taxable part of a TSP withdrawal you receive before age 59 and a half, unless an exception applies (IRS Publication 721, retrieved 2026-10-11). This is on top of regular income tax, and it applies only to taxable money.
The most important exception for federal employees is the separation rule, often called the rule of 55.
- Separated at 55 or later. If you leave federal service during or after the calendar year you turn 55, withdrawals from that TSP account are free of the 10 percent penalty, even before 59 and a half (IRS Publication 721, retrieved 2026-10-11).
- Special provision employees at 50. Law enforcement officers, firefighters, air traffic controllers and others covered by special retirement provisions qualify if they separate in or after the year they turn 50, or with 25 years of service (TSP, retrieved 2026-07-05).
- Life annuity or long payment schedules. Payments taken as a life annuity or as substantially equal payments over your life expectancy are generally exempt.
- Death and disability. Payments to beneficiaries after your death, and payments because of total and permanent disability, are generally exempt.
- Required minimum distributions. These are never penalized.
The separation rule has a catch. If you separate at 52, the exception does not apply later just because you turn 55. And money you roll from the TSP into an IRA loses the separation exception, because IRAs follow their own age 59 and a half rule.
Worked example (educational estimate on the assumptions shown). Two FERS employees each withdraw $40,000 of traditional TSP money at age 56. Ana separated at 56, so she owes income tax but no penalty. Ben separated at 53, so his $40,000 is hit with the 10 percent additional tax: $4,000, on top of income tax. For both, if the payment is an eligible rollover distribution, the TSP withholds 20 percent ($8,000) toward federal tax, and the final bill is settled on their tax returns. The example assumes no exceptions beyond those named and no state tax.
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04How are TSP withdrawals taxed?
Traditional TSP withdrawals are taxed as ordinary income in the year you receive them, while qualified Roth TSP withdrawals are federal-tax free (IRS Publication 721, retrieved 2026-10-11). Agency contributions and their earnings are always traditional money.
Withholding is where people get surprised:
| Type of payment | Federal withholding |
|---|---|
| Single withdrawal or installments expected to last under 10 years | 20 percent mandatory on the taxable part, unless rolled over directly |
| Installments expected to last 10 years or more | Withheld like a pension, based on your withholding election |
| Direct rollover to an IRA or eligible plan | None |
| Life annuity payments | Withheld like a pension, based on your election |
Source: IRS Publication 721, retrieved 2026-10-11. You cannot choose zero withholding on an eligible rollover distribution paid to you (IRS Publication 721, retrieved 2026-10-11).
Withholding is not your final tax. It is a down payment. A large withdrawal can push you into a higher bracket for that year and can affect how much of your Social Security is taxed and, later, your Medicare premiums. Spreading withdrawals across years is one way people manage that. State taxes vary widely; our federal retirement taxes guide has a state table.
05What are TSP required minimum distributions?
Required minimum distributions (RMDs) are the minimum amounts the IRS requires you to withdraw each year from your traditional TSP balance once you reach a set age: 73 under current law, rising to 75 for people born in 1960 or later (IRS, retrieved 2026-10-11). The first RMD can be delayed until April 1 of the following year, but then you take two in one year.
Four rules make TSP RMDs friendlier than they sound:
- Still working? Not yet. If you are still employed by the federal government, you can delay TSP RMDs until the year you retire (IRS, retrieved 2026-10-11).
- Roth is exempt. Roth balances in workplace plans like the TSP are not subject to RMDs while the owner is alive (IRS, retrieved 2026-10-11).
- Your other withdrawals count. Installments or partial withdrawals you already took during the year count toward the RMD.
- The TSP calculates it. The amount is your prior year-end traditional balance divided by an IRS life expectancy factor for your age. If you have not withdrawn enough by year end, the TSP pays out the remainder.
An RMD is a minimum, not a maximum. It does not mean you must spend the money. You can withdraw it and reinvest it in a taxable account, but it cannot be rolled into an IRA.
06How do TSP rollovers work?
A rollover moves TSP money to an IRA or another employer plan without it counting as a taxable withdrawal, as long as traditional money goes to a traditional account and Roth money goes to a Roth account. A direct rollover, sent straight from the TSP to the new account, avoids the 20 percent mandatory withholding.
- 01
Open the receiving account first
Get the IRA or plan's account number and payment instructions.
- 02
Request the withdrawal in My Account
Choose the amount, the source (traditional, Roth or both) and direct rollover as the payment method.
- 03
Match the tax type
Traditional to traditional IRA or plan; Roth TSP to Roth IRA or a Roth plan account. Converting traditional money to a Roth IRA in the same move is taxable.
- 04
Confirm the deposit
Check that the full amount arrived and was coded as a rollover.
Rolling out is not automatically better. You keep low costs, the G Fund and the separation-at-55 penalty exception by staying in the TSP. An IRA offers more investment choices and different withdrawal flexibility. Money can also flow the other way: the TSP accepts rollovers in from traditional IRAs and eligible employer plans, which some retirees use to consolidate. If you are thinking about a TSP annuity versus keeping the balance invested, compare the two with your own numbers first.
07What happens to my TSP when I die?
At your death, your TSP is paid to the beneficiaries on your TSP designation, or under the federal order of precedence if you have none. A surviving spouse can keep the money in the TSP as a beneficiary participant account; other beneficiaries receive a payment they may be able to roll over.
Keep your designation current, especially after marriage, divorce or a death in the family. The TSP hub guide explains the order of precedence, and our federal beneficiary checklist covers all four federal forms.
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08Moving forward with your TSP withdrawals
TSP withdrawals work best as part of a plan for all your retirement income. Your FERS pension and Social Security arrive on their own schedules; if you retire before 62, the FERS supplement may fill part of the gap. The TSP is the flexible piece that fills whatever the formulas do not, and the order and timing of withdrawals affect your taxes for years.
The TSP income calculator runs an educational estimate of withdrawal amounts on assumptions you enter; it is not a projection or a promise.
FFEBA is an education organization. If you want someone to look at your own numbers, we can match you with a Federal Retirement Consultant (FRC), a professional trained on federal benefits. The FRC designation is listed with FINRA. The first review is free, nothing is booked until you choose a time, and you are never obligated to work with anyone we introduce. Get matched with an FRC.
09Questions federal employees ask
At what age can I withdraw from the TSP without a penalty?
Withdrawals are free of the 10 percent IRS early withdrawal penalty at age 59 and a half, or earlier if you separate from federal service in or after the calendar year you turn 55. Special provision employees such as law enforcement officers and firefighters can qualify at 50 or with 25 years of service (TSP, retrieved 2026-07-05).
How much tax will I pay on a TSP withdrawal?
Traditional TSP money is taxed as ordinary income at your federal rate in the year you receive it, and many states tax it too. The TSP withholds 20 percent of an eligible rollover distribution for federal tax, and you cannot opt out of that withholding unless the money is rolled over (IRS Publication 721, retrieved 2026-10-11). Qualified Roth withdrawals are federal-tax free.
When do I have to start TSP required minimum distributions?
Required minimum distributions from the traditional TSP balance generally start for the year you reach age 73, rising to 75 for people born in 1960 or later. You can delay them while you still work for the federal government (IRS, retrieved 2026-10-11). Roth TSP balances are not subject to RMDs during your lifetime.
Can I roll my TSP into an IRA?
Yes. After separation you can move all or part of your TSP to a traditional IRA, a Roth IRA (for Roth money), or another eligible employer plan. A direct rollover avoids the 20 percent mandatory withholding. Money that leaves the TSP loses access to the G Fund.
What is a TSP hardship withdrawal?
A hardship withdrawal lets a current employee take out their own contributions and earnings for a documented financial hardship. It is taxable, may carry the 10 percent penalty if you are under 59 and a half, and cannot be paid back into the account.
Does my spouse have to sign off on a TSP withdrawal?
If you are a married FERS participant, your spouse has a right to a joint life annuity, so most other withdrawal choices require your spouse's notarized consent or a waiver. For CSRS participants, the TSP notifies the spouse instead.
Reviewed by the FFEBA education team. Last reviewed October 2026.
Sources
- Thrift Savings Plan, withdrawals in retirement, retrieved 2026-07-05
- Internal Revenue Service, Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits (for 2025 returns), retrieved 2026-10-11
- Internal Revenue Service, retirement plan and IRA required minimum distributions FAQs, retrieved 2026-10-11
- Internal Revenue Service, retirement topics: significant ages for retirement plan participants, retrieved 2026-10-11
- U.S. Department of the Interior, In-service withdrawals training document, retrieved 2026-10-11
Every government figure on this page carries its source and retrieval date. Worked examples are educational estimates on the assumptions shown, not a projection of any person's benefit. FFEBA is an education organization, not a financial advisor.
