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How to Withdraw Early TSPs Without a Penalty

We have more options to adjust our TSP than our insurance benefits. This is because we can change our contribution allocations, including our contribution amount, as often as we like. It is important to pay attention to your situation and take the time to stay up-to-date on your TSP. Although early withdrawals from TSPs are usually penalized, there are instances when it is possible to do so without additional penalties. The amortization method results in the largest withdrawal amount, while the minimum distribution method usually produces the lowest.


TSP Withdrawals

This information is provided for informational purposes only. It should not be construed or used as investment advice or recommendation regarding any security purchase or sale. Forward-looking statements and opinions are not guaranteed to be accurate. Securities investing is risky, and can result in the loss of principle. Any investment strategy or plan cannot be guaranteed to succeed.

If you retire in the year that you turn 55 or older, the simplest way to avoid the 10% penalty is to simply take the TSP. If you are 55 years old in December and you also retire this year, you can access your TSP without paying the 10% penalty.

The simplest rule to get around the 10% penalty before 59

Federal employees who are subject to special provisions, such as firefighters and air traffic controllers, have their rules slightly different. These groups would be eligible to access their TSP free of penalty if they retire in the year they turn 50.


Age 70 – You should apply for Social Security now, as you will no longer be eligible for delayed retirement credits.

One word of caution: I have seen individuals withdraw all of their TSP funds without rolling it over into an IRA. Then they realized that they have a huge tax bill. A ship without a rudder is one that moves in the opposite direction. Make a plan with direction, and then understand what that plan is. It should include income planning and tax planning. The plan should then be written down and executed according the “the plan”.

Near-retirees as well as federal retirees often find this information concerning the penalty-free provision at 55 surprising. 59 1/2 is a mantra that is repeated so often it seems like it is law. It is usually law. However, TSP does not apply to federal employees who are separated from federal service at 55.