As your FERS retirement date approaches, it’s crucial to grasp how your account is managed once the TSP receives notification of your separation from service. From processing withdrawal requests to navigating rules regarding outstanding TSP loans, being informed empowers you to effectively manage your TSP account.
Handling of Your Account Upon Receipt of Separation Notice
Upon receiving official notice from your agency, it can take up to 30 days for the TSP to process your separation. During this period, immediate access to your funds isn’t available. Once the TSP receives notice, your online account’s “separation access” is activated, enabling you to initiate withdrawal requests. It’s worth noting that any outstanding TSP loans upon separation must be repaid within 90 days, impacting withdrawal requests and potentially triggering tax implications.
TSP Withdrawals (Distributions)
In retirement, your TSP distribution options encompass installment payments, a lump-sum payout, or the purchase of a life annuity. If signatures are required, print the request form, obtain notarized signatures, and submit it to the TSP via mail or fax. The TSP may take an additional 60 days to process your initial payment. More details on withdrawal options are available through TSP Withdrawals in Retirement.
Retaining Funds in the TSP
You aren’t obligated to make TSP withdrawals until reaching the age for Required Minimum Distributions (RMDs). Leaving funds in your TSP post-separation enables continued accrual of tax-deferred earnings, albeit without the ability to make further contributions. For traditional TSP accounts, the RMD age is now 73 for individuals born after December 31, 1950, rising to 75 in 2033. Additionally, Roth TSP balances are exempt from RMDs as of 2024.
Transfers From Qualified Employer Accounts
Even after separation from service, you retain the option to transfer (rollover) qualified funds into your TSP account from eligible employer-sponsored plans, excluding Roth IRAs. Notably, beneficiary participants aren’t eligible to transfer funds into the TSP. Additional insights are available through Move Money Into The TSP.
Tax Considerations on TSP Withdrawals
Typically, the TSP withholds a portion of the taxable distribution for federal income tax. Different withholding rates and rules apply to various types of TSP payments, detailed in Tax Rules About TSP Payments.
For personalized guidance on managing your TSP in retirement, consider consulting with an FRC® trained advisor.
