Three ways to draw down your TSP
There is no one right answer for TSP withdrawals — the best approach depends on your other income (pension, Social Security), your tax situation, and how long you expect to need the money. The three methods above cover the main approaches federal retirees use.
The 4% rule — a planning starting point
Financial planner William Bengen (1994) found that retirees could withdraw 4% of their initial portfolio balance in year one — then adjust upward for inflation annually — and not run out of money over a 30-year retirement, given a balanced stock/bond allocation.
For federal employees, the 4% rule has an important nuance: most FERS retirees already have a pension that covers a large share of fixed expenses. If your pension + Social Security covers 80% of your budget, you may only need a 1–2% draw from TSP — in which case TSP becomes a long-duration buffer or legacy asset rather than a primary income source.
The 4% rule is not a guarantee and was calibrated for a 60/40 portfolio. For 35- or 40-year retirements, a 3–3.5% rate provides more cushion. The slider above lets you test any rate between 2% and 8%.
Required minimum distributions (RMDs)
The IRS requires distributions from Traditional TSP beginning at age 73 (SECURE 2.0, effective 2023). The annual RMD is calculated by dividing your prior year-end account balance by a distribution period factor from the IRS Uniform Lifetime Table. The factor decreases each year, meaning your RMD as a percentage of your balance increases as you age.
Missing an RMD triggers a 25% excise tax on the shortfall (reduced to 10% if corrected within the two-year correction window). Roth TSP accounts are not subject to RMDs under SECURE 2.0 — another reason to consider in-plan Roth conversions before age 73.
If you are still a federal employee at 73, your TSP RMD is deferred until you separate from service.
TSP withdrawals and the federal pension interaction
Unlike the generic "how much can I withdraw" question, federal retirees need to think about TSP withdrawals in the context of their total income stack: pension + Social Security + TSP. A large pension can push you into the 22–24% bracket before you withdraw a dollar from TSP. In that case, Roth TSP becomes significantly more valuable — and delaying large Traditional TSP withdrawals (beyond RMD minimums) may reduce your lifetime tax burden.
This tool models TSP in isolation. The full combined picture — pension + supplement + Social Security + TSP, after taxes and FEHB — belongs in the retirement timeline.
When can you withdraw penalty-free?
Federal employees who separate from service in the year they turn 55 (or later) can take TSP distributions without the 10% early withdrawal penalty — this is the "rule of 55" for employer- sponsored plans. If you separate before the year you turn 55, the penalty applies until age 59½. Law enforcement officers, firefighters, and air traffic controllers have a reduced threshold of age 50.
Disability separations and 72(t) substantially equal periodic payments (SEPPs) are other penalty exemption paths, but they are complex and irreversible once started. Confirm with a tax advisor before electing them.