TSP After Leaving Federal Service

Your TSP Account Survives Separation

Walking away from a federal job doesn't mean walking away from your Thrift Savings Plan. As long as your account balance is $200 or more, your TSP account stays open and fully functional after separation. Your money remains invested, continues to grow tax-deferred, and you retain full control over fund allocations across the G, F, C, S, and I Funds.

What does change: agency contributions stop immediately. No more matching, no more automatic 1% — the money already vested stays, but nothing new comes in from the government side.

Vesting Rules for Agency Contributions

Your own employee contributions and agency matching contributions (up to 4% of pay) are yours from day one. The Agency Automatic 1% contribution follows a different rule: it vests after 3 full years of creditable civilian service. Some specialized appointments vest at 2 years.

If you leave before the vesting threshold, the automatic 1% funds — and any investment gains on them — get forfeited back to the TSP. Everything else stays.

The $200 Minimum and What Happens Below It

If your vested balance is $5 or more but less than $200, TSP automatically distributes it to you as a single payment after it receives your separation information, any outstanding loans are closed, and more than 60 days have passed, unless you made a distribution election before the payment is processed. TSP does not automatically roll this payment into an IRA or another plan, but you may be able to make an indirect rollover under tax rules. If your balance is below $5 when you separate, TSP forfeits it; you can reclaim it by contacting the TSP record keeper, but earnings stop accruing after forfeiture.

Withdrawal Options After Separation

Once separated, you can take money out of your TSP through several channels:

Partial withdrawal lets you pull a specific dollar amount while leaving the rest invested. No limit on the number of partial withdrawals after separation.

Installment payments set up recurring monthly, quarterly, or annual distributions. You can change the amount or stop them at any time.

Full withdrawal closes the account entirely. You can take it as a lump sum, roll it to an IRA or new employer's 401(k), purchase a TSP annuity, or combine these options.

Direct rollover moves funds tax-free into a traditional IRA or eligible employer plan. This avoids the 20% mandatory federal tax withholding that applies to direct payouts. Roth TSP funds can roll into a Roth IRA.

The Age 55 Exception to the 10% Penalty

Standard IRS rules impose a 10% early withdrawal penalty on traditional TSP distributions taken before age 59½. But the Separation from Service exception provides relief: if you separate from federal service during or after the calendar year you turn 55, withdrawals taken after separation are exempt from the penalty.

For qualified public safety employees — law enforcement officers, firefighters, air traffic controllers — the threshold drops to age 50, or after 25 years of qualified service regardless of age.

This exception applies only to withdrawals from the TSP account associated with the federal job you separated from. It doesn't cover TSP funds rolled into an IRA — once money moves to an IRA, the age 55 rule no longer applies and the standard 59½ threshold governs.

Interfund Transfers Still Work

After separation, you keep full access to interfund transfers. You can reallocate your existing balance among the G, F, C, S, and I Funds as often as you want (subject to TSP's standard two-transfer-per-month rule, with unlimited transfers into the G Fund).

You can also roll money into your TSP from a traditional IRA or a previous employer's 401(k) plan, which can be useful if TSP's low expense ratios beat your other options.

TSP and Your FERS Separation Path

Your TSP decision is independent of whether you choose a deferred annuity, postponed retirement, or SF 3106 refund. However, the refund path opens one specific opportunity: if you take a contribution refund and want to defer taxes on the interest portion, you can roll that interest directly into your TSP using Form TSP-60.

A complete walkthrough of how TSP interacts with each separation path — including the age 55 calculation and rollover mechanics — is in the Leaving Federal Service Early toolkit.

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