TSP Withdrawal Expectations in 2019

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Long awaited changes to withdrawal policies for TSP will allow more flexible options thanks to the TSP Modernization Act signed into law November 2017. This law allows a two-year window for the TSP to implement the changes, which must be completed by November 2019. The changes require massive revisions to TSP recordkeeping, forms, publications, TSP website, and training.

TSP participants are excited about these changes, especially those approaching retirement or in retirement. Sign up for TSP email notifications to stay up to date on new information. The most recent TSP Fact Sheet (5/2018) on upcoming withdrawal changes is available by clicking here.

Once the new withdrawal policies go into effect, you will have more options for accessing your money from your TSP account.

Here is a quick recap of what you can expect:

Partial Withdrawals

  • New policy will allow for multiple age-based (age 59 ½ and over) in-service and post-separation partial withdrawals. (Currently only one partial withdrawal is allowed whether it is in-service or in retirement). Under the new law, you will be able to take up to four age-based in-service withdrawals per calendar year.
  • There will be no limit on the number of partial withdrawals you can take after separating from service (except no more than one every 30 days).
  • You will be able to take partial withdrawals while you’re receiving monthly installment payments

Roth, Traditional or Both

  • You will soon be able to choose whether your withdrawal should come from your Roth TSP, your traditional TSP, or a mix of both. This is GREAT news to allow for more efficient tax planning in retirement! (Currently, all withdrawals come out proportionately from traditional TSP and Roth TSP).

Installment Payments

  • As a retired TSP participant, you will be able to not only choose monthly payments, but you will also be able to choose quarterly or annual payments. You will also be able to stop, start, or make changes to your installments at any time. (Currently the only option you have for installment payments is monthly, and you can only change the payment between October 1st to December 15th, for the following year).

Withdrawal Deadline

  • You will no longer have to make a full withdrawal election after you turn age 70 ½ and have separated service. You will still need to make your IRS required minimum distributions (RMDs). (Currently, the TSP requires that you make a full withdrawal election after you turn 70 ½ and have separated service. If you fail to establish a full withdrawal, TSP initiates the “abandonment” process.

FedSavvy will continue to track the progress, and TSP assures that once they know the exact date the changes will go into effect they will announce it widely, through the TSP website, social media and email.

Carol Schmidlin is an Investment Advisor Representative offering investment advisory service through Global Financial Private Capital, LLC, (“GFPC”) and a Registered Representative offering securities through GF Investment Services, LLC. (“GFIS”). FedSavvy nor Franklin Planning are affiliated with GFPC or GFIS