Employees in private companies can save for retirement through employer-sponsored 401(k)s. If you had a career in the US Army or other branch of the military, or as a federal employee, the Thrift Savings Plan is essentially the federal equivalent of a 401(k). In addition to making withdrawals after retirement, you can also withdraw Thrift Savings Plan funds as a loan or for hardship reasons.
Thrift Savings Plan
If you are a member of the U.S. military, the Thrift Savings Plan -- commonly called the TSP -- supplements your military retirement pay. Because the TSP is a defined contribution plan, the amount of retirement income you receive from it depends on the amount you contributed to the account and the accumulated earnings. The TSP offers several funds for you to choose from, with different risk levels. These professionally-managed funds are not available to the general public.
In order to withdraw funds as a loan, you must currently be in the uniformed services, as repayments consist of payroll deductions. You may take out either a general loan, or a residential loan for purchasing a primary residence from your TSP, but you cannot have more than one of each at a time. Both types of loans have repayment schedules from one to 15 years. You cannot borrow matching contributions, so you must have a minimum of $1,000 of your direct earnings contributions in order to take out a TSP loan. You can fill out a loan application either online or by filling out form TSP-20. You then receive a loan agreement from the TSP outlining the terms, which you must sign and return before the expiration date of the agreement.
You may make in-service withdrawals for two permitted reasons, based on either age or financial hardship. Eligibility for the latter consists only of withdrawals for uninsured medical expenses, personal casualty losses, legal expenses due to divorce or separation, or recurring negative monthly cash flow. Once you make this type of withdrawal, the money cannot be repaid, so it could impact your future retirement. You must pay taxes on the withdrawal unless it is a TSP Roth contribution, and if making the withdrawal due to hardship you are subject to the Internal Revenue Service's 10-percent early withdrawal penalty. If you are married, your spouse must agree to the in-service withdrawal by signing a consent waiver. For financial hardship, fill out Form TSP-76 online or on paper. This form requires supplying detailed financial information, although documentation is not necessary. You must also certify that you have a genuine reason for a financial hardship withdrawal. If over the age of 59 1/2, you may apply for an age-based withdrawal by completing Form TSP-75, either online or on paper. The minimum for both types of in-service withdrawals is $1,000 of your vested funds.
In retirement, you may make a one-time partial withdrawal, leaving the remaining amount in the TSP. Fill out Form TSP-77, either online or on paper. You can't request a partial withdrawal if you have previously made an age-based in-service withdrawal. If you want to withdraw all of your TSP money, you can choose between a full lump-sum withdrawal, a periodic withdrawal, or purchase of a lifetime annuity. For periodic withdrawals, you can choose between either a certain dollar amount paid monthly until the entire account is paid out, or monthly payments based on the life expectancy table supplied by the IRS. For the lifetime annuity -- a benefit paid monthly for the rest of your life -- you must purchase a minimum of $3,500 as of 2012. Whatever your choice for the full withdrawal, fill out Form TSP-70, available online or on paper. For all forms, your signature must be notarized.
A graduate of New York University, Jane Meggitt's work has appeared in dozens of publications, including PocketSense, Financial Advisor, Sapling, nj.com and The Nest.