I was wondering if anyone had advice about withdrawing funds from the Thrift Savings Plan (TSP). I have tried three different times to transfer and withdraw my TSP account but have been told first that there was a date issue when I was trying to transfer to another account, which was never fully explained to me. Then I had the wrong form to withdraw my funds. I just sent in the correct form, but I am now being told that I have submitted more than one request so it cannot be processed. –Juan


We’ve never heard of someone having such a hassle when it comes to the Thrift Savings Plan. At this point, you may realize the form you need is the TSP-70 for government civilians. Or if you’ve contributed to the TSP via your military service, use the TSP-U-70. It sounds like you’re trying to transfer directly from the TSP to a traditional Individual Retirement Account (IRA) or a new employer’s retirement plan. This makes sense because it will allow you to avoid any income taxes and allow your money to earn interest and grow over time. A direct transfer is best – from the TSP to your new plan or the IRA. On the other hand, if the TSP sends you a check directly, they are required to withhold 20 percent for federal income taxes. This can cause problems because even if you subsequently add the money to an IRA as a rollover contribution, you’ll have to come up with the 20 percent that was withheld or that money will be subject to taxes and a 10 percent penalty if this happens before age 59 ½.
Our advice would be to call the folks at TSP, let them know what you’re trying to do, and ask them to help you out. It could be that you just need to add a cover letter to your next request, indicating that it supersedes all previous requests. No matter how you do it, remember: keep the money in a tax-deferred account such as an IRA to continue that retirement savings momentum!