While there is talk of loosening the current restrictions on withdrawing funds from your TSP account, any changes, if they happen, are likely to take some time to implement. Until then, how many partial lump-sum withdrawals can you take from your TSP account? The most common answer I have heard from TSP participants to this question is “one”. It is true that the form – Form TSP-77 – used to request a partial lump-sum withdrawal from your TSP account may only be processed once in a participant’s lifetime. It is not true, however, that this is the only way to extract a partial lump-sum from your account.

There are, in fact, three ways to take a partial lump-sum from your TSP account:

  1. Before you separate from TSP covered service, you may take a loan from your account, and then fail to repay it after you separate. The unrepaid balance will be declared, and reported as, a partial lump-sum distribution. This distribution will not prevent you from filing form TSP- 77 later.
  2. Before you separate from service and after you reach age 59 1/2, you may file form TSP-75, or after you have separated, you may file Form TSP-77, to request a partial lump-sum distribution from your account. Only one of these forms can be processed during your lifetime and Form TSP-77 may not be filed after you have requested a full withdrawal using form TSP-70.
  3. After you have separated from service, you may file Form TSP-70 to request a full withdrawal, but this request can include a partial lump-sum followed by regular monthly payments.

As you approach retirement, it may be tempting to consider leaving the TSP entirely in order to obtain more flexibility in accessing your money. In my experience, this is rarely necessary with a little planning and a good knowledge of the rules. Rather than abandon the TSP and the unique advantages offered to you by the G Fund after you retire, you should consider using the various lump-sum withdrawal options I’ve described here to create and maintain a cash reserve, outside of your TSP account, to absorb your cash needs.

In general, I recommend that you maintain adequate cash resources, at all times, to more than meet your expected withdrawal needs for the coming year. It’s better to carry more cash than you’ll need than to have to abandon the TSP early to gain access to spendable cash in a pinch.

Written by Mike Miles
For the Federal Times
Publication October 2017