Withdrawals from your Thrift Savings - While Working and After Leaving Employment

Tonight I discuss all of the things you can do with your TSP while working (loans & in-service withdrawals) and after you stop working (RMD withdrawals, lump sum payments, periodic payments, rollovers and annuities). Don't hesitate to let me know if you have ANY questions or suggestions for other topics. We're one week into 2023. Happy New Year everyone.

[@vermasean]

Thanks for this detailed video! 👍

[@debbiehatch8016]

You're very welcome

[@paulguzman6947]

Another amazing overview, thank you Debbie!

[@debbiehatch8016]

Thank YOU so much for being here, Paul.

[@Ludatajuju]

Best info on the web. Please give us some new videos.

[@debbiehatch8016]

Thank you very much for the nice compliment. I'd love to have time to do more videos - problem is, You Tube doesn't pay the bills. I'll make new episodes as I can. Again, thank you so much.

[@JoeZelko1]

Great information and thanks for your expertise.

[@richardlindsay8256]

I watched several of your videos in the past few days and you frequently ask for questions/suggestions. Here is a question and a suggestion: Question: How where when do I participate in your live stream? Question/suggestion: Have you given any thought to how you might address the fact that information in your videos naturally becomes dated. For example I watched the FEHB/Medicare video you made just 9 months ago and the lag time from Medicare signup to in effect has already changed. In addition recent legislation now requires future US Postal Service retirees to sign up for Medicare just like the Tri-Care folks. (Comment: I suspect that in the not too distant future all federal retirees will be required to sign up for Medicare in order to keep FEHB.) Suggestion: How about agency specific videos that addresses the peculiarities specific to a particular agency. I will selfishly suggest that you first do one that addresses the US Postal Service. You could talk about rules that are specific to a particular agency as well as where to find retirement specific information on each agencies LES and SF-50. I suggest starting with the bigger agencies and work down to the smaller ones. Or it might make more sense to start with the ones you are most familiar with.

[@debbiehatch8016]

Thank you for watching, and for engaging in the stream. My You Tube channel is not a source of income. I run it as a free service to help people understand some of these concepts. I support myself by traveling (over 200 days each year) and teaching in-person / virtual classes since 2004. I started running a live stream merely as a way to engage with people more, during COVID. I've continued them as many find the short topics helpful but I do not, currently, have a set day or time. It depends when I'm teaching / traveling, and what my consulting schedule looks like. When I hold a Live, it is on Facebook. All recordings are then transferred to You Tube. I have absolutely considered the fact that these videos become dated and appreciate you mentioning it as well. Change happens frequently these days! Just trying to understand it (the Appropriations Act is over 4,100 page long), digest, and then present it in a timely manner, can be difficult. That's one piece of federal legislation - never mind agency specific changes which can be difficult to even gain consistent access to. While this is not an income stream for me, my intent is most definitely to redo/update videos as I get a chance. I try to provide the most current, accurate, easy to understand information I possibly can. Right now we're just finishing up a very robust retirement "season" as most FERS employees leave on 31 Dec and most CSRS employees retire between 31 Dec - 3 Jan; and I am going through the laborious process of updating my classroom slides / handouts. I will update videos here as I can.

[@Tronn42]

Your the best. I have learned so much and retiring 6-29-2024 :)

[@debbiehatch8016]

Thank you very much, Tom. Congratulations on your impending retirement.

[@elitehills1544]

Wonderful information thank you!

[@debbiehatch8016]

Thank YOU. I’m glad this was helpful.

[@michaelvadney5803]

Thanks for the video! Do you think that there will EVER be a time that you can convert you traditional TSP funds into a Roth TSP fund? I know that I would have to pay the taxes upon conversion, but it would be great to just stay in the TSP rather than moving to a regular IRA and then converting to a Roth. I really enjoy how easy it is to invest while in the TSP. Thank you.

[@debbiehatch8016]

Without a crystal ball, Michael, I have no way to know. It would be a nice change.

[@alrocky]

@ *Michael Vadney* If currently US military or federally employed, the best alternative is to contribute to Roth TSP which is effectively similar.

[@michaelvadney5803]

Too late

[@Simplewisdomwithandrea]

Thank you Ms Hatch!

[@debbiehatch8016]

You're very welcome

[@Jazzy_530]

Hi Debbie…great vid. Why do Special Provision personnel get all the benefits? They can pull money out at age 50 without a 10% Tax penalty when regular federal workers have to wait until 55 or 591/2…seems like an unfair rule to me.

[@debbiehatch8016]

It's because retirement eligibility is different too. Special provision employees place themselves at risk, routinely. They are fighting structural and/or forest fires; they are protecting our country's borders; they are doing law enforcement duties. As such, they can retire from the federal government at 50 with 20 years of special service or at any age if they have 25 years of special service. Other employees are not eligible to retire until their Minimum Retirement Age (55 - 57 depending on year of birth). All employees are now eligible to withdraw TSP when they retire from the federal government. Prior to the law changing, a FF could retire at 50 but couldn't draw TSP (part of their retirement) without penalty until 59 1/2.

[@Jazzy_530]

@@debbiehatch8016 thanks for the response. Seems like military retirees should be grouped with special provision personnel after so many years with civilian federal service.

[@debbiehatch8016]

@@Jazzy_530 Not at all disagreeing with you. To date, though, the law does not reflect this.

[@violabrown1459]

👋 Debby, I have a question. What's the time frame from retiring and receiving your monthly Tsp payments. Also if I take 2000 monthly does that mean 2400 monthly 🤔 that will eat away the money really fast. THATS TOTALLY NOT RIGHT 😕. THEY ARE ROBBING THE PEOPLE . All the money we saved was useless.

[@debbiehatch8016]

Sorry for the delay. This is a busy time of year. Withdrawals are typically processed 7-10 business days. Keep in mind though that you must wait 30 days between withdrawal and distribution requests. If you stop your installments within 30 days of making a withdrawal or distribution request, you need to wait the full 30 days from the date of the withdrawal request before you can request installments again. When we pull money, there is typically a 20% tax WITHHOLDING. That doesn’t mean they’re “taking” 20%. It means 20% is sent to the IRS up front. At the end of the year you receive a 1099R and file your taxes. Just as is the case with taxes withheld from your paycheck…maybe you’ll get a refund or maybe you’ll owe more. If you’re doing tax deferred TSP, that money has never been taxed. It is going to be when you pull it out.

[@violabrown1459]

@@debbiehatch8016 thank you for your time. Appreciate the information. I understand that better 😌

[@richardallen6432]

Dang! Debbie...I am finding your videos concerning all my questions as I close in on retirement. I am wanting to know how TSP in service withdrawals would work and affect me...

[@debbiehatch8016]

Awesome!!! Thanks for letting me know.

[@richardriggs4413]

great information

[@debbiehatch8016]

Thank you so much.

[@richardriggs4413]

I've taken 2 small age based withdrawls since Sept 2023. Does that mean if I wanted to in 2024 I could take four withdrawls?

[@debbiehatch8016]

It does mean that, yes. With current rules you may take up to four age-59 ½ withdrawals per calendar year.

[@richardriggs4413]

Thank You Debbie. So glad I found you.@@debbiehatch8016

[@PH-dm8ew]

So TSP only allows 1 electronic bank link. Which i use for a monthly disbursement. I have heard horror stories about weeks to months delays in mailing a check from TSP to outside brokers for example for Roth Conversions. Any suggestions on how to expedite and make sure the moneys get timely sent?

[@debbiehatch8016]

There have been more than a few issues and delays with TSP's recent changeover. f you have only one source (traditional or Roth) in your partial or total distribution, you can direct all or part of it to only one IRA account or eligible employer plan If you have both traditional and Roth balances in your distribution, you can direct all or part of the traditional portion to one IRA or plan, and all or part of the Roth portion of the distribution to another IRA or plan. Unfortunately I have no suggestions or tips/tricks for making this faster. I can only offer what TSP does which is, "Request a rollover by logging into your TSP account, or by contacting the ThriftLine." One point to note is that you should NOT use forms provided by the new plan or financial institution."

[@PH-dm8ew]

@@debbiehatch8016 Thanks I am aware of the process. It is not a new issue. Have seen many that did a transfer out that the check took forever to get to the new company. I had similar experience years ago transferring into the tsp. Check was held waiting for someone in TSP to process it.

[@debbiehatch8016]

@@PH-dm8ew I understand. Sorry I don't have a solution to make this easier or quicker.

[@PH-dm8ew]

No worries, you provide a great service and some great info on your channel. Thank You

[@craigpfifer1251]

just curious, what happens if you do a complete withdrawl from TSP holdings? imagine the taxes would be steep! are you charged 20% on the total? (example 300,000) or is it a higher amount?

[@debbiehatch8016]

Hi Craig. While TSP does a normal 20% tax withholding, that’s not what you “owe” or “pay”. It is what’s sent to the IRS up front (just like money goes in from your pay check every two weeks). At the end of the year, you’ll get a 1099 to use for taxes. If you’re not in a 20% bracket, you’d get a refund or potentially owe more.

[@craigpfifer1251]

thank you, makes sense. was just trying to get an idea, no matter the process, of how much would be gleaned from the example amt.@@debbiehatch8016

[@flex2of4]

Debbie, another great video! Can you replace Siri and Alexa? My question is this: Hardship in service withdrawal. Can it be dental, and do I have to pay it back? Am 58 now.....

[@debbiehatch8016]

You made me laugh this morning. Thank YOU. The TSP Bulletin reads, "To qualify for a hardship withdrawal, the participant must have an immediate and significant financial need that necessitates a distribution from his or her TSP account. The need must arise out of either a recurring negative monthly cash flow situation, medical expenses, legal expenses for separation or divorce, or personal casualty loss. Hardship requests cannot be taken for expenses already paid or those that are reimbursable." You can read more here. www.tsp.gov/bulletins/19-9/ You do not have to pay it back. In fact, until recently, you couldn't. BUT if you don't pay it back, not only are taxes due on the money, you will also owe a 10% penalty tax. Under the new "Emergency Withdrawal" provision approved in the Appropriations Act which becomes effective 12/31/23, "the term ‘emergency personal expense distribution’ means any distribution to an individual for purposes of meeting unforeseeable or immediate financial needs relating to necessary personal or family emergency expenses." This doesn't "have" to be repaid but, "If a distribution is treated as an emergency personal expense distribution in any calendar year, no amount may be treated as such a distribution during the immediately following 3 calendar years unless the previous distribution is fully repaid." Essentially then, only once every three years unless it IS paid back.

[@fpn66]

To clarify, while I'm in service (less than 59 1/2) I can do a hardship withdraw without penalties and have 3 years to pay it back? I would pay the Federal tax but have it refunded when the money is paid back. Is this still the case in August of 2024?

[@debbiehatch8016]

Yes, but, to do one without penalty it's limited to $1,000 per year.

[@debbiehatch8016]

www.irs.gov/pub/irs-drop/n-24-55.pdf

[@gregthomas2448]

Hi Debbie, question I retired September 30, 2022 at age 55. I withdrew my entire TSP account on Jan 4, 2023 My understanding is that I fall under the Rule of 55 therefore just the normal 20% federal withholding. I should not face the additional 10% IRS penalty. Now I received a letter from TSP saying I have 60 days to roll it over into another plan or “I could be subjected to additional tax penalties” Do I need to inform the IRS in this 60 day window that I’m invoking the Rule of 55 ? Or do I wait for this upcoming tax season to advise them or can I wait until the following year because I withdrew it in 2023 ? Thank you ! You are absolutely the best.

[@debbiehatch8016]

Thank you so much both for the compliment, and the opportunity to explain this. You do not have to notify anyone and you are not invoking anything. You are simply going to be exempt from the 10% penalty. This is a standard message that is notifying you that you "could" be subjected to additional tax penalties, not that you will be. The walk a fine line and can't "give you tax advice". Page 3 of this booklet ( www.tsp.gov/publications/tspbk26.pdf ) reads: "The additional 10% tax generally does not apply to • payments made after you separate from service during or after the year you reach age 55 (or the year you reach age 50 if you are a public safety employee as defined in section 72(t)(10)(B)(ii) of the Internal Revenue Code)" You will receive a 1099 for this withdrawal (reported on your 2023 tax return) next year.

[@gregthomas2448]

@@debbiehatch8016 Fantastic, thank you ! I worked for 34 years in Federal Law Enforcement and the only agency that really intimidates me is the IRS, always stay in compliance 💯⭐️👍 with them ! 😉😯🧐🥹🌴 Debbie is the best 💎

[@debbiehatch8016]

@@gregthomas2448 😂 That’s fair!! They scare me too.

[@gregthomas2448]

@@debbiehatch8016 yes of all the alphabet Federal agencies the scariest one is the IRS. It’s better to know the devil you are dealing with, than the devil you don’t know 🤫

[@ampiciline]

Hello Miss Hatch and happy new year ! I am not under special provision group My question is on 19:02 section (exception rule ) ...I am 52.9 years old and I just got my 20 years at VA and i am thinking to separate (resign ) ..... assuming I did resign today at age of 52.9 and wait(defer/postpone) ) almost 2 years till REACH to age 55 , Now my question: Am I still able to take out my TSP at age 55 without 10 % penalty or I ONLY can do that exception if I am separating ONLY at age of 55???? please kindly advise and clarify

[@debbiehatch8016]

To be exempt from the 10% penalty you either (a) can't leave the government until the year you will turn 55 OR (b) you can elect monthly payments based on life expectancy OR (c) you can elect an annuity. See page 3 of this TSP booklet. www.tsp.gov/publications/tspbk26.pdf

[@ampiciline]

@@debbiehatch8016 I am so sorry for my late appreciation. Miss Hatch , you are so prompt in responding and so accurate. A wealth of knowledge .we are so blessed to have you here . again, thank you so much for all you for us

[@ampiciline]

@@debbiehatch8016 Hello Miss hatch , dose " fix installment more than >10 years " get treated like " life expectancy installment exemption early penalty 10 % policy ??? the link you provided says exactly that they are in the same category, BUT it dose NOT specifically name IF more than > 10 years fixed installment. to be exempt from 10% early penalty at ANY age before 55, for example age 53 .....this is very confusing please kindly advise

[@debbiehatch8016]

@@ampiciline Tax law is always confusing, isn't it? I agree. It can be a very good idea to talk to a tax specialist (of which I am not) about your specific situation. Both life expectancy withdrawals and those expected to last 10 years or more are considered "periodic payments" by the IRS but please see page 8 which talks specifically about the 10% penalty. It reads, "Installments based on life expectancy are an exception to the early withdrawal penalty tax. BUT ...the penalty can be applied retroactively if you do any of the following within five years of beginning your installments or before you reach age 59½: • stop your life-expectancy-based installments • switch them to installments of a fixed dollar amount • take a distribution from your TSP account in addition to your life-expectancy-based installments Doing any of those things in that period of time will make you liable for the penalty tax on the installments you previously received."

[@ampiciline]

@@debbiehatch8016 do you think since BOTH ( life expectancy installment AND > 10 years installment considered " periodic payment " they Both get 10 % tax exempt ???? I mean TSP says the life- expectancy is exempt of 10 % penalty But dose not say about the > 10 years instalment .....one may extrapolate that more than > 10 years installment withdrawal is 10% exempt too , since it is in the same category ( periodic payments ) ....tough to say

[@DiMplEzz17]

Hi Debbie, is there a way I can take out money if I don't have the $1k in there? I opened an individual account with Fidelity. I was thinking maybe I can contribute what I need to make it to the $1k, or maybe I can xfer the money from tsp into fidelity.....

[@debbiehatch8016]

Absolutely. The minimum is $1,000 (or your full account balance). If you are retired, or still working and at least 59.5, you can do a rollover from TSP. www.tsp.gov/publications/tspfs05.pdf

[@DiMplEzz17]

@@debbiehatch8016 ok I am still employed & I am 45...

[@markpenrod4542]

I was off work do to a injury and surgery. I took a hardship withdrawal because I had no income. Is any of this withdrawal tax deductible if i itemize?

[@LittleCabin]

We took advantage of a modest general purpose loan early in 2020 to assist in a down payment on our eventual retirement property. While we understand you are losing the ability to accrue growth on that money when not invested in the TSP, we feel it was as great opportunity since it was only 1.875% at that time.

[@debbiehatch8016]

I love that!!! Yes!! I tell my students, all the time, there can be good reasons to take out TSP loans (seems like you found one) AND that money cannot be the only thing we look at. I have a retirement triad including health, wealth, and personal fulfillment. Thanks so much for your comment.

[@LittleCabin]

@@debbiehatch8016 AND, it (the property) gave us a place to ride out the early stages of the pandemic! Just found your channel, and am enjoying your content -- looking to retire at the end of 2028, so trying to make sure I have all my ducks in a row.

[@osiumeh6261]

Debbie, very nice and informative program. My question is this. Can a person retiring by December 31, 2023 take an age based withdrawal say in October/November 2023 and then set up monthly payments in January/February 2024? The individual is aged more than 59 1/2 years. Thanks.

[@debbiehatch8016]

Thank you very much for the nice compliment. If the individual is 59.5 or older, yes, he can take an age based withdrawal in the fall of 2023 and then set up payments after he retires. Congratulations on your impending retirement.

[@osiumeh6261]

@@debbiehatch8016 Thank you and keep up the good work.

[@silverowlthrifter]

I had no idea we could take a withdrawal and then repay in 3 years...Am I understanding this...we took out about $130,000.00 last year and paid huge federal and state income taxes. We are in the 28% tax bracket. So if we paid it back in 2 years( which we may be able to do after selling our house) we could get that tax money back?

[@debbiehatch8016]

I apologize for the delay in getting back to you. I was out of the country most of April and am now tackling a mountain of work while trying to acclimate from an 11 hour timezone difference. Vacation is awesome but we definitely have to work harder before and after. You may not have known about this because it's a new change - which was passed into law only in December 2022. It does not become effective until 12/31/23 and won't help in your outlined situation. When it becomes effective, you would be limited to being able to pull $1,000 for “an immediate and heavy financial need.” Taxes will be withheld but if a person pays the money back within 3 years, they can also ask for a tax refund of money paid. Not only is it limited to $1,000 per year but it is also not retroactive.

[@alrocky]

You cannot return money back to TSP after you make a withdrawal. You can take out max $50k loan and pay that $50k back to TSP.

[@debbiehatch8016]

​@@alrocky While i appreciate your input, and I hate that it's take me this long to provide a response, you're actually wrong about both things. The maximum TSP loan is either the LESSER of: - Your contributions & their earnings in that acct (military or civilian) excluding any outstanding loan balance. - 50% of total vested acct balance or $10,000 (for either, minus any outstanding loan balance), whichever is greater. OR - $50,000 minus highest outstanding loan balance, if any, during the last 12 mths, even if that loan has been paid in full. And If an employee had a hardship directly related to Covid, s/he DID most certainly have the opportunity to pull money (through an In-Service Withdrawal called a Hardship Withdrawal) from TSP. They could put it all back in within three years and, if they didn’t pay back, they have three more years over which to pay the taxes. Also of note is the fact that the Secure 2.0 Act which passed in December 2022 will allow employees to do a penalty-free withdrawal of up to $1,000 / year for emergencies. The employee defines the emergency and while taxes are due, they have 3 years to pay the money back to their TSP account and request a refund of the taxes paid. This becomes effective on 12/31/23.

[@alrocky]

@@debbiehatch8016 TSP disagrees with you on both counts. $50k is *_maximum_* loan allowed by TSP and IRS. A fed employee or service member may not take loan larger than $50k. I did not state or suggest everyone guaranteed a $50k loan. From TSP website: A coronavirus-related distribution ... (IRS), is “a distribution (withdrawal) ... from January 1, 2020, to December 30, *2020* ... to $100k. That time period has expired so my OP is factually correct. *Silver Owl Thrifter* cannot return $130k back from last year's withdrawal as $100k is maximum allowed and withdrawal was in 2022 and S.O.T. could not have applied for a COVID withdrawal. Inasmuch as that $1,000 reference does not take effect until 12/31//23 it has no bearing or weight on this YT thread on Apr/May of 2023.

[@debbiehatch8016]

@@alrocky Excuse me. I have zero issue with people asking for clarification or references. In fact, I encourage people to ask for those things. The OP did just that and I responded. I have no problem with people questioning something I say either. I'm human - sometimes makes mistakes and would never claim to "know everything". In fact, I tell people that I don't. You didn't come in and address me in any way even though this is my page. Instead, you simply thought you would do a better job answering a participant than I did and took on that role. I am not going to apologize for being rude to you. What I posted about the loan is ABSOLUTELY FACTUAL whether you stated everyone is guaranteed $50,000 or not. www.tsp.gov/tsp-loans/ It also doesn't appear that you read my response to the OP so I'm going to cut and paste it here for you. "You may not have known about this because it's a new change - which was passed into law only in December 2022. It does not become effective until 12/31/23 and won't help in your outlined situation. When it becomes effective, you would be limited to being able to pull $1,000 for 'an immediate and heavy financial need.' Taxes will be withheld but if a person pays the money back within 3 years, they can also ask for a tax refund of money paid. Not only is it limited to $1,000 per year but it is also not retroactive." Your responses have added nothing.

[@whiteranger79]

No longer in the military should i move it into a annunity

[@debbiehatch8016]

I'm not a certified financial planner so do not feel qualified to give financial advice. You can move it to an annuity but you definitely do not have to. One of the benefits of staying within TSP is the very low administrative costs (about 1/5th of what many other companies charge). Additionally, you can continue to move your money twice a month if you'd like and have you have a lot of flexibility for withdrawal - including an annuity if that's what you'd like to do. Benefit of going with an annuity is that you can invest in things TSP does not offer to you. Beware potential additional costs and know exactly what you'll be paying (when and why) before going with an annuity.

[@whiteranger79]

@@debbiehatch8016 thank bc i am with so investors but they want me to take all of it out

[@debbiehatch8016]

@@whiteranger79 I'm not sure exactly what you mean here. You have a financial planner who's telling you that you should take it all out - or you have someone trying to sell you an annuity? If THAT'S the case - be very careful.

[@whiteranger79]

@@debbiehatch8016 selling an annunity

[@alrocky]

@@whiteranger79 Generally you're better off avoiding annuity. You may retain your TSP account or move it to traditional IRA with Fidelity Schwab or Vanguard as IRA custodian. Look for index funds to invest in.