When you are making investment decisions related to your Thrift Savings Plan (TSP), one of the things that you should keep in mind is that your TSP withdrawals are taken equally from your TSP fund allocation.

You cannot pick and choose which fund or type of investment the money will come out of. TSP Withdrawals typically extract sums from each of your investments in the same proportion in which you have spread your contributions among the various funds.

So if you currently have 20% of your TSP funds in each of the five core funds (G, F, C, S and I), and then begin withdrawing $10,000, then $2,000 from each of the funds would make up for it.

Traditional vs. Roth TSP Withdrawals

The same principle applies when you have split your contributions into traditional and Roth TSP investments. If you invested 90% into traditional, and 10% into Roth, your TSP withdrawal would be comprised of the same 90-10 ratio from your traditional and Roth investments.

Note that the tax treatment on your TSP withdrawal would also be affected by your choice of TSP account. Your Roth contributions are already taxed while traditional contributions are tax-deferred. So, the Roth TSP portion of your TSP withdrawal would not be subject to taxes, while you would still need to pay state and federal income taxes on the traditional part of any distribution you take from the account.

In summary, when you are making investment decisions in your TSP account, think ahead a bit to when you are ready to consider taking a TSP withdraw from your account, about the time you are ready to retire (or already retired). Where would you like the distribution to come from at that time? It’s wise to factor that in when you choose your TSP Fund(s) and the type.