Anonymous
Anonymous asked in Business & FinanceInvesting · 1 decade ago

How can you take money out of your TSP and close the account?

I've been in the military for about seven years now and I've set up a Thrift Savings Plan (TSP). I have accumulated roughly 19,000 in it over the years.

Is it at all possible to withdraw this money and close my account? I know the government will tax this heavily if I choose to.

But I am in a bit of a financial crisis right now and that money would be of great use.

What are my options? Some legal help would be GREATLY appreciated

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  • 1 decade ago
    Favorite Answer

    Investing in the Thrift Savings Plan (TSP) for your retirement is a no-brainer! Quite simply, you should invest as much as you can afford in the TSP because:

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    You save money on income taxes.

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    100 percent of the money you have deducted from your pay goes into your investment account, and no income tax is deducted. If, for example, you are in a 10 percent tax bracket and you contribute $100, your net pay goes down by only $90.

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    All of the earnings on your account are tax-deferred. You don't pay the tax until you withdraw money, usually during retirement.

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    Contributions of your tax-exempt combat or hazardous-duty pay retain their tax-exempt status, so you won't pay tax on this money, even when you withdraw it. (Earnings on your tax-exempt contributions are tax-deferred until they are withdrawn. There is also pro-ration of amounts-see below.)

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    You may be eligible for matching contributions if you serve in a critical specialty.

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    This is free money that results in an immediate return of as much as 100 percent on your contributions. If you don't contribute, however, you can't earn the match-even if you work in a critical specialty.

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    If you need access to your money, you can borrow from your TSP at a low rate of interest.

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    Personal loans can be for up to five years.

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    Loans to purchase your residence can be for up to 15 years.

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    Your loan is repaid through payroll deductions; it's like borrowing from yourself.

    Start Contributing Now

    The first step is to complete a TSP election form (TSP-U-1), using these guidelines:

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    To calculate your contribution (per paycheck) to the TSP, multiply that amount by 1.111. Figure out how much to contribute.

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    If you can do without $40 per paycheck, put in for a contribution of $44.44. Your TSA account will get the full $44.44, and your net pay will go down only $40!

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    Put your incentive pay or special pay (including bonus pay) into the TSP.

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    You can earmark a portion (up to 100 percent) of these extra pays to go directly to the TSP. It's a smart use of extra money. If you can't put it all in, consider putting in half. [You cannot participate with your extra pay unless you also have some contribution coming out of your base pay.]

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    If your account earns 7 percent per year, your $40 per month will grow to nearly $47,000 in 30 years.

    Allocate Your Investments for the Long Haul

    All of the investment choices available in the TSP offer diversification to reduce risk, but only the Government Securities fund (G) guarantees that you won't lose money. It would be prudent to invest any TSP funds that you anticipate withdrawing within five years in the G fund. You will earn a medium-term (four-year-plus), government-securities return on your money in an investment that you can turn to cash at any time.

    The more risk you take, the better the chance of making more money. You should look at how your investments are allocated every year or two. Investment performance (gains and losses) will change the percentages over time. You can rebalance your asset allocation by making transfers among your different investments groups.

    Lifecycle Funds

    If you do not want to take the time to constantly adjust your asset allocation, then consider using a Lifecycle Fund (L Fund). The L Funds provide you with a convenient way to diversify your account among the G, F, C, S, and I Funds, using investment mixes that are set to different time horizons. Your “time horizon” is the date (after you leave Federal service) that you think you will need the money in your TSP account. Because it is important for each L Fund to maintain its target investment mix, the TSP will automatically rebalance each L Fund daily. Then, each quarter, the investments in each L Fund will shift to a slightly more conservative mix.

    Don't Touch Your Money Before Retirement

    Any time you take money from your fund, you are taking money out of your retirement. The best plan is to never touch the money until you retire. Sometimes you find yourself in financial trouble. Before you take out money, consider taking a loan from the plan-borrowing money and paying yourself back.

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    You must pay taxes and possibly penalties on your withdrawals. Loans let you pay yourself back over time, and all your money keeps working for you. But the interest you pay yourself back may be less than you would have earned if you hadn't touched the money.

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    Wait until you reach age 59-1/2 to withdraw money penalty-free from your TSP.

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    You will have to pay tax on the money you withdraw (except for any tax-free funds from combat or hazardous-duty pay), but you won't have to pay an additional 10-percent penalty.

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    If money is needed for income, you can withdraw substantially equal amou

  • linnea
    Lv 4
    4 years ago

    Tsp Early Withdrawal

  • 1 decade ago

    I'm not familiar with a TSP, but with any savings all you have to do is transfer the money, or have a check drawn.

    If you withdraw more than $10,000 in cash in a day you are required to fill out a form, to avoid this just take out all your money in increments. This is only if you withdraw it as cash.

    Either way, I recommend you transfer the money to a checking account first, so you can readily use that money (e.g. write checks, withdraw cash from an atm, pay online, etc.)

    Hope someone else gives some more input that can help.

    P.S. I don't believe you are required to pay tax up front. I could be wrong, I'm a little rusty on my memory. After you withdraw the money closing the account shouldn't be a problem. In fact most accounts will close if the balance is $0.00 Have your financial institute help you from start to finish. That's their job, and it's your money that helps to pay their job. Remember that.

    Source(s): Ex-Teller
  • Anonymous
    5 years ago

    This Site Might Help You.

    RE:

    How can you take money out of your TSP and close the account?

    I've been in the military for about seven years now and I've set up a Thrift Savings Plan (TSP). I have accumulated roughly 19,000 in it over the years.

    Is it at all possible to withdraw this money and close my account? I know the government will tax this heavily if I choose to.

    But...

    Source(s): money tsp close account: https://tr.im/Nvkr7
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  • Anonymous
    1 decade ago

    You can withdraw your TSP under the following conditions.

    1. You are age 59 ½ Limited to one withdrawal

    2. A financial hardship 1 withdrawal for every six months. Most take out minimum of $1,000. You will be subject to 10% federal withholding tax.

    A full withdrawal can be made once you separate the service or you could leave it in TSP and withdraw when you like.

  • 5 years ago

    For the best answers, search on this site https://shorturl.im/axCV0

    Nothing. Stopping your contribution does not mean "closing" the account. The money you already contributed remains in your TSP account.

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