TSP Withdrawal Rules

Big news from the Federal Register – 30-day rule for TSP will expire next month! Read what this means for your federal retirement.

When writing about the limitations of the Thrift Savings Plan (TSP) in comparison to 401(k) accounts or IRAs, one of the more restrictive rules has always been the one withdraw per 30-day rule for those who have retired from federal service. Regarding this rule, we’ve got some good news. Posted on the federal register by the Federal Retirement Thrift Investment Board (FRTIB) recently, a direct final rule is set to eliminate this requirement.

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Unless “significant adverse comment” had been received by the public by April 15^th, the 30-day rule for TSP withdrawals will expire on May 15^th. Seeing how the requirement was not popular among federal retirees and the reason for implementing it is no longer a concern, it is not believed that such public comment was received.

TSP Modernization Efforts

In 2017, the TSP saw a series of improvements thanks to the TSP Modernization Act. Before becoming law, federal retirees had to choose between keeping money in the TSP, doing a full withdrawal or rollover into an IRA, or purchasing a single premium immediate annuity from MetLife. On top of this, federal employees who had yet to retire were only allowed one age-based withdrawal until they retired. Beginning in 2019, the 2017 modernization law went into effect.

The biggest improvements from the legislation pertaining to taking money out of the TSP included –

• Active federal employees are now able to make 4 qualified withdraws every year.
• Retired federal employees are able to take unlimited partial withdraws from their TSP – but only one every thirty days. (This part of the rule is what is being phased out.)

When the TSP switched to a new recordkeeping company in June of 2022, a lot of outdated paper-based processes were replaced with online electronic systems. This effectively made the 30-day rule obsolete because the reason it was created was to prevent duplicate withdrawal requests, which would occur when participants sent identical requests through both fax and mail. As the process is now done completely over the internet, the 30-day rule serves no purpose but to annoy federal retirees who need to take an additional amount from their TSP after requesting one withdrawal in the previous 30 days.

The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Serving Those Who Serve writers  and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. **

30-Day Rule for TSP Set to End