How Often Can You Take a TSP Hardship Withdrawal?

The Thrift Savings Plan (TSP) serves as a retirement savings and investment plan designed for federal employees and members of the uniformed services. It provides a structured way to save for retirement through contributions and investment options. A financial hardship withdrawal offers a specific avenue for participants to access their accumulated funds before retirement. This type of withdrawal is intended for immediate and severe financial needs, distinguishing it from other withdrawal options available through the TSP.

Understanding TSP Hardship Withdrawals

A TSP hardship withdrawal allows participants to access their own contributions and associated earnings to address an immediate and significant financial need. This option is available only while actively employed in federal civilian service or the uniformed services. The amount withdrawn must be at least $1,000 and cannot exceed the actual amount of the financial hardship.

To qualify for a hardship withdrawal, the financial need must fall into one of several defined categories:
Recurring negative monthly cash flow (when monthly income is consistently less than monthly expenses).
Unreimbursed medical expenses for the participant, spouse, or dependents that would be eligible for federal income tax deduction.
Personal casualty losses (damage or destruction to property from sudden, unexpected, or unusual events).
Unpaid legal fees incurred for a separation or divorce from a spouse.
Losses resulting from a major disaster declared by the Federal Emergency Management Agency (FEMA).

Frequency and Consequences of Hardship Withdrawals

A TSP participant may make only one financial hardship withdrawal within any six-month period. For example, if a withdrawal is disbursed in March, another request for a hardship withdrawal cannot be processed until September. This limitation ensures that such withdrawals are used for genuine, infrequent emergencies.

The rule requiring a six-month suspension of TSP contributions after a hardship withdrawal was eliminated on September 15, 2019. Participants are no longer prohibited from making contributions to their TSP account after taking a financial hardship withdrawal. This means contributions, including any agency matching contributions for eligible participants, can continue uninterrupted.

Despite the elimination of the contribution suspension, financial hardship withdrawals carry significant tax implications. The withdrawn amount is subject to federal income tax and may also be subject to state income tax. If the participant is under age 59½, the withdrawal may incur an additional 10% early withdrawal penalty. Unlike a loan, funds from a hardship withdrawal cannot be repaid to the TSP account, resulting in a permanent reduction of retirement savings.

Applying for a Hardship Withdrawal

The application process for a TSP hardship withdrawal begins once a participant determines they meet eligibility criteria and understand the implications. The required form is Form TSP-76, “Financial Hardship In-Service Withdrawal Request,” available on the TSP website.

When submitting the form, participants must certify under penalty of perjury that they have a genuine financial hardship. Participants should retain all relevant records, such as medical bills, repair estimates, or legal invoices, for their personal files. This documentation substantiates the claim if requested for verification.

Completed forms can be submitted online via the My Account feature on the TSP website, by mail, or by fax. Online submission is often efficient, especially if spousal consent is not required and direct deposit is preferred. Once submitted, processing and disbursement typically take 7 to 10 days.