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.
Don’t miss the next TSP webinar for federal employees, retirees, and their families
Unless “significant adverse comment” had been received by the public by April 15th, the 30-day rule for TSP withdrawals will expire on May 15th. 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When the TSP switched to a new recordkeeping company in June of 2022, a lot of outdated paper-based processes were replaced with online electronic systems.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.
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**Written by Benjamin Derge, Financial Planner, ChFEBC℠ 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 Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors
***The Thrift Savings Plan (TSP) is a retirement savings and investment plan for Federal employees and members of the uniformed services, including the Ready Reserve. The TSP is a defined contribution plan, meaning that the retirement income you receive from your TSP account will depend on how much you (and your agency or service, if you're eligible to receive agency or service contributions) put into your account during your working years and the earnings accumulated over that time. The Federal Retirement Thrift Investment Board (FRTIB) administers the TSP.***
