One of the ways to make an in-service TSP withdrawal is by exercising the TSP Financial Hardship Withdrawal provision and showing proof of financial hardship. Before you do this, you should know a few things about eligibility and the impact of this action on your account. For starters, the financial need would have to do with at least one of the four options below:
– Medical expenses
– Legal expenses
– Personal casualty losses not covered by insurance
– Recurring negative monthly cash flow.
On top of this, you would also need to satisfy certain eligibility requirements before you can make hardship withdrawals. You cannot withdraw less than $1,000, so you need to have at least this amount of your own contributions and earnings in the account. Also, note that you are only allowed to initiate one hardship withdrawal in a six-month period.
Impact of an in-service tsp financial hardship withdrawal
If you are less than 59 and a half you may have to pay the 10% early TSP withdrawal penalty. The amount withdrawn may also be subject to state and federal income taxes. TSP will automatically withhold 10% of the unqualified withdrawal to pay for Federal income tax. Note that the 10% penalty and the 10% income tax withholding are two separate things.
Also, you cannot make contributions to your account for six months after making a hardship withdrawal. Federal Employees Retirement System (FERS) employees may also lose their matching agency contributions for this period.
Apply for tsp financial hardship withdrawal with tsp 76
If you still think you need to do this, simply fill up and submit Form TSP 76 (Financial Hardship In-Service Withdrawal Request). You could also apply and complete the process online by logging into your account if you don’t need your spouse’s consent and you want the amount deposited directly to your bank.