TSP Modernization Act partial withdrawals

Updated: July 28, 2026

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Roughly 6.9 million participants hold a Thrift Savings Plan account, including 2.1 million uniformed service members and 4.8 million federal civilian employees, according to the Federal Retirement Thrift Investment Board.

Before September 2019, the Plan’s withdrawal rules were among the most restrictive of any defined contribution plan in the United States. Separated participants could take exactly one partial withdrawal in their lifetime. After that, they had to commit to a single full-withdrawal election (annuity, monthly installments, or single payment), with no mixing and no second chances.

The TSP Modernization Act of 2017 rewrote the rule set. Partial withdrawals are now unlimited in number, with one every 30 days as the minimum spacing. Installments can be modified at any time. A separated participant can take a partial withdrawal one year and start monthly installments the next without forfeiting future options.

For a military retiree or federal contractor planning a tranche-by-tranche move into a self-directed gold IRA, the new framework is the operational floor for everything that follows.

What the TSP Modernization Act actually changed for partial withdrawals

The pre-Modernization rule set (in force until September 14, 2019) capped a separated participant at a single post-separation partial withdrawal.

Once that partial was taken, the participant had to make a full-withdrawal election covering the entire remaining balance. The options were a lump sum, monthly installments based on a fixed dollar amount or the IRS life-expectancy table, a TSP life annuity through MetLife, or some combination. The election was treated as final.

A participant who chose monthly installments and later wanted a partial withdrawal for a one-time expense had no mechanism to do so without rolling out the entire balance first.

The Modernization Act (Public Law 115-84) and the implementing rules at 5 CFR Part 1650 changed five things at once. First, the cap on post-separation partial withdrawals was removed entirely; a participant can take a partial at any time after separation, then another partial 30 days later, then another 30 days after that, indefinitely.

Second, age-based in-service withdrawals (for active participants age 59 and a half or older) were similarly uncapped, with the same 30-day spacing. Third, installment payments can now be started, stopped, or changed (dollar amount or life-expectancy basis) at any time without forfeiting the partial-withdrawal option.

Fourth, separated participants can elect a life annuity through MetLife at any time, not only as part of the original full-withdrawal election. Fifth, the participant can transfer the Roth portion and the Traditional portion to different IRAs in a single withdrawal request, formalizing what was previously a documentation challenge for Roth TSP holders.

The minimum partial withdrawal amount remains $1,000 per the FRTIB rule set published at tsp.gov. There is no maximum; a participant can roll out 100% of the Traditional balance in a single partial, leaving the Roth balance untouched, or vice versa.

The 30-day spacing rule between partial withdrawals applies to the calendar interval, not to the processing date; submitting a request 28 days after the prior payout triggers a hold until day 30.

Direct trustee-to-trustee rollovers to a Traditional IRA, Roth IRA, or another qualified plan are coded G on Form 1099-R; cash distributions to the participant are coded 1, 2, or 7 depending on age and exception. The distinction matters at the receiving custodian and at the IRS.

Who can take a partial withdrawal under the Modernization Act

The eligibility set splits into three groups, each with its own paperwork and tax-treatment layer.

Separated participants of any age. A federal employee or service member who has separated from federal service can take partial withdrawals at any time, in any number. That covers military separation, civilian retirement, civilian resignation, and transfer to a non-covered position. The $1,000 minimum and the 30-day spacing rule apply.

Participants under age 59 and a half who take a partial withdrawal as a cash distribution (rather than as a direct rollover) are subject to the IRC §72(t) 10% early-withdrawal penalty unless an exception applies. Qualifying exceptions include separation from federal service at or after age 55 under IRC §72(t)(2)(A)(v), public-safety officer separation at age 50 under IRC §72(t)(10), and substantially equal periodic payments under IRC §72(t)(2)(A)(iv). Narrower hardship exceptions also exist.

The direct-rollover route to an IRA bypasses the penalty entirely because no distribution is recognized.

Active participants age 59 and a half or older. An age-based in-service withdrawal under 5 CFR §1650.31 allows an active employee or service member who has reached 59 and a half to take partial withdrawals from the Plan without separating. The Modernization Act extended the same unlimited-frequency rule (one withdrawal every 30 days minimum) to age-based in-service withdrawals.

A working federal contractor with a TSP balance and an active duty National Guard position can take age-based in-service withdrawals at 59 and a half and route them directly to a gold IRA. That preserves the contribution stream while creating rollover capacity in parallel. Contributing to the TSP via National Guard payroll continues throughout.

Beneficiary Participant Account holders (surviving spouses). A surviving spouse who elects to maintain the deceased participant’s TSP balance as a Beneficiary Participant Account (BPA) is also covered by the Modernization Act’s partial-withdrawal rules. The BPA holder can take partial withdrawals to fund a Traditional or Roth IRA in the surviving spouse’s name, with the same $1,000 minimum and 30-day spacing.

The BPA does not allow new contributions, and the SECURE Act 10-year rule does not apply to a spousal BPA (the spouse takes RMDs based on their own age beginning at 73 under SECURE 2.0).

Non-spouse beneficiaries do not have BPA access; they receive a single lump-sum payment that is taxable as ordinary income unless rolled to an inherited IRA under SECURE Act 10-year distribution rules.

Step-by-step: how to execute a partial withdrawal to a self-directed gold IRA

Can you roll your account into a precious metals IRA? Eligibility checker

Most retirement money can move into a precious metals IRA once it qualifies as an eligible rollover distribution. Pick your account type and situation for a general answer. Always confirm specifics with your plan administrator or custodian.

Account typeTraditional IRARoth IRASEP IRASIMPLE IRA401(k) or 403(b) from a former employer401(k) or 403(b) at your current employerGovernmental 457(b)Thrift Savings Plan (TSP)Pension lump sum or refund (after you separate) Your situationSeparated from that employerStill employed there, under 59 and a halfStill employed there, age 59 and a half or older

Check eligibility

General guidance only, not tax or financial advice. Eligibility depends on your specific plan document and IRS rules; confirm with your plan administrator and a tax advisor. A direct trustee-to-trustee transfer avoids the 60-day rule and 20% mandatory withholding.

The right dealer explains every fee up front. Get Augusta's free precious metals IRA company checklist.

The procedure has six ordered steps. Done in this sequence, the partial withdrawal lands at the gold IRA custodian as a non-taxable direct rollover with the 1099-R coded G and no withholding. Done out of order, the participant can end up with a 20% federal withholding shortfall, a 60-day redeposit clock, and an early-withdrawal penalty exposure on the withheld amount.

Figure 1. The six-step Modernization Act partial-withdrawal sequence. Steps 1 to 3 establish eligibility and the receiving IRA. Steps 4 to 6 execute the direct rollover, verify the 1099-R coding, and complete the metals purchase at the IRS-approved depository.

1. Confirm Modernization Act eligibility. Verify separated status (DD Form 214 for military, SF-50 for civilian) or that the active participant has reached age 59 and a half for an in-service withdrawal. Pull the current TSP balance broken down by Traditional and Roth, with combat-zone basis figures if applicable. The basis breakdown is available on the annual TSP statement and via the secure messaging system at tsp.gov. Confirm that no prior partial withdrawal in the last 30 days will block the request.
2. Open the self-directed gold IRA at a vetted custodian. The receiving custodian must accept direct trustee-to-trustee transfers from the TSP and must support the Traditional IRA or Roth IRA destination type matching the source TSP bucket. For a participant rolling Roth TSP, the receiving Roth IRA must be open; for Traditional TSP, a Traditional IRA is the standard destination. Open both if the Modernization Act split-rollover option is being used (basis to Roth, pre-tax to Traditional, per IRS Notice 2014-54).
3. Notify the metals dealer of the inbound rollover. The dealer needs the receiving custodian’s account number, the expected dollar amount, and the planned metals allocation. Some dealers prefer to delay the metals quote until the rollover has settled at the custodian; others lock in a quote in advance with a settlement window. Ask before submitting the tsp.gov request.
4. Submit the partial withdrawal request at tsp.gov. Log in to my.tsp.gov, navigate to Withdrawals and Distributions, select Partial Withdrawal, choose the dollar amount (minimum $1,000), and select Transfer to a Traditional IRA or Transfer to a Roth IRA as the distribution method. Enter the receiving custodian’s name, account number, and ABA routing or check-payable instructions per the custodian’s transfer paperwork. Confirm the rollover coding will appear as Box 7 Code G on the issued Form 1099-R. The TSP processes most requests within 7 to 10 business days.
5. Verify the receiving deposit and 1099-R coding. The custodian confirms receipt of the wire or check. The participant should retain the TSP confirmation letter and the custodian’s deposit confirmation. The Form 1099-R issued the following January should show Box 1 (gross distribution) equal to the partial amount, Box 2a (taxable amount) equal to $0 for a Traditional-to-Traditional direct rollover, and Box 7 Code G. If Box 2a shows a non-zero amount or Box 7 shows a code other than G, contact the TSP within 30 days to request a corrected 1099-R.
6. Direct the custodian to purchase IRS-approved metals at the depository. Once the custodian has the funds, the participant instructs the dealer on the specific metals to purchase. The metals must meet IRS fineness standards under IRC §408(m): gold .995 or higher (American Gold Eagles are a statutory exception), silver .999 or higher, platinum and palladium .9995 or higher. Storage must be at an IRS-approved depository in segregated or commingled accounts; home storage was rejected by the Tax Court in McNulty v. Commissioner, 157 T.C. No. 10 (2021), with the entire IRA balance reclassified as a taxable distribution plus accuracy-related penalty.

How partial withdrawals interact with combat-zone basis and VA disability income

For military participants, two factual layers can interact with a Modernization Act partial withdrawal: combat-zone tax-exempt (CZTE) contributions held inside Traditional TSP, and VA disability income that affects the participant’s adjusted gross income calculation. Both are commonly mishandled at the partial-withdrawal step.

CZTE contributions made to Traditional TSP under IRC §112 sit inside the Traditional balance as after-tax basis.

The TSP tracks basis at the account level, not at the contribution level. That means a partial withdrawal from Traditional TSP falls under the pro-rata rule of IRC §72(d). The basis portion and the pre-tax portion travel together in proportion to the source balance.

If a participant has $40,000 of CZTE basis inside a $200,000 Traditional TSP balance and takes a $50,000 partial withdrawal, the IRS applies the pro-rata rule. It treats $10,000 of that partial as basis (40,000 / 200,000 = 20% basis ratio) and $40,000 as pre-tax.

The basis portion can be routed to a Roth IRA without tax under IRS Notice 2014-54; the pre-tax portion goes to a Traditional IRA. The Form 1099-R Box 5 figure shows the basis amount attributable to the partial. For a deeper look at the basis-tracking mechanics, see our combat-zone basis tracking guide.

VA disability income (under 38 U.S.C. §5301) is excluded from federal gross income entirely. A partial TSP withdrawal taken as a direct rollover does not enter AGI either, so no interaction occurs at the rollover step.

The interaction surfaces later, at the distribution step from the receiving IRA. At that point, ordinary-income IRA distributions stack on top of any taxable retirement income, including a military pension, FERS annuity, and Social Security. They do not stack on top of VA disability.

For a participant whose only taxable income is the military pension, sizing future IRA distributions to fit under the next bracket threshold is a planning option. Partial withdrawals routed as direct rollovers preserve that option for the IRA-distribution years, rather than triggering tax at the rollover.

One edge case worth flagging: a partial withdrawal from Roth TSP (whether or not it included CZTE pay) lands as a Roth IRA rollover with no basis-tracking layer. The entire Roth account is already basis, so no pro-rata calculation applies.

The 5-year clock on the receiving Roth IRA, however, starts at the first contribution to that Roth IRA, not at the first Roth TSP contribution.

A participant with 25 years of Roth TSP contributions rolling to a newly opened Roth IRA may face a 5-year clock on the receiving account before qualified-withdrawal treatment applies to the earnings portion. IRS Publication 590-B covers the 5-year rule mechanics in detail.

Common mistakes federal contractors and military retirees make

Five recurring errors come up in TSP partial-withdrawal cases that did not happen under the pre-Modernization rule set. Each is documented either in IRS guidance, in FRTIB participant-services case patterns, or in tax-clinic intake files for military retirees.

Mistake 1: requesting the partial as a cash distribution to the participant, then attempting a 60-day rollover. The TSP withholds 20% federal income tax on any cash distribution under IRC §3405.

The participant receives 80% of the requested amount and has 60 days to redeposit 100% (the original gross amount) into the receiving IRA, with the 20% shortfall made up from outside funds. Miss the 60-day deadline and the withheld 20% becomes a taxable distribution plus a 10% early-withdrawal penalty if the participant is under 59 and a half.

Direct trustee-to-trustee rollover (Box 7 Code G) bypasses the withholding entirely.

Mistake 2: assuming the once-per-12-months indirect-rollover rule applies to direct TSP rollovers. The Bobrow v. Commissioner T.C. Memo. 2014-21 ruling limits a participant to one indirect (60-day) rollover per 12-month period across all IRAs. Direct trustee-to-trustee transfers from a qualified plan to an IRA, including TSP partial withdrawals coded G, are not subject to the Bobrow limit.

A Modernization Act plan can execute six direct partial rollovers per year without triggering the once-per-12-months rule, as long as each is a direct transfer.

Mistake 3: triggering the 30-day spacing rule by submitting the second partial too early. The TSP processes partial-withdrawal requests on a first-in, first-out basis and rejects (or holds) any request submitted within 30 calendar days of the prior partial’s payout date. The clock runs from the disbursement date, not the request date. Plan the second partial to submit on day 31 to avoid the hold.

Mistake 4: rolling the entire Traditional TSP balance to one IRA when CZTE basis is present. A Traditional-to-Traditional direct rollover preserves the basis on Form 1099-R Box 5 but commingles it inside the receiving Traditional IRA. The pro-rata rule under IRC §408(d)(2) then spreads the basis across every future distribution from any Traditional IRA the participant holds.

The cleaner path is the IRS Notice 2014-54 split-rollover: basis to a Roth IRA, pre-tax to a Traditional IRA, executed as a single coordinated partial withdrawal. The Modernization Act explicitly permits routing the Roth bucket and the Traditional bucket to different IRAs in a single request.

Mistake 5: rolling out before resolving an outstanding TSP loan. An unpaid TSP loan at the time of separation or partial withdrawal becomes a deemed distribution and is subject to ordinary income tax (plus the 10% early-withdrawal penalty if under 59 and a half).

The loan balance does not roll over with the rest of the account; the deemed distribution is reported on Form 1099-R with code L. The Modernization Act did not change this rule. Resolve any TSP loan before initiating the partial-withdrawal sequence, or expect the deemed-distribution paperwork at year-end.

Coordinating TSP partial withdrawals with contractor 401(k) consolidation

A federal contractor who held TSP and then built a 401(k) at one or more private-sector contractors after separation can consolidate those balances inside a single self-directed IRA without triggering tax. The Modernization Act partial-withdrawal mechanism makes that possible. The order of operations matters: the IRS’s once-per-12-months indirect-rollover rule and the receiving custodian’s processing capacity both have ceilings.

The cleanest sequence runs the TSP partial first as a direct trustee-to-trustee rollover to the Traditional IRA at the self-directed custodian. Each contractor 401(k) then follows as a direct trustee-to-trustee rollover from the plan to the same Traditional IRA.

Direct rollovers from a qualified plan to an IRA are not subject to the Bobrow once-per-year rule. A participant can execute several direct rollovers from different plans into the same IRA in the same calendar year.

The receiving custodian processes each as a separate inbound transfer, with the source-plan documentation preserved for audit. The participant should retain the distribution paperwork from each source plan and the receiving custodian’s deposit confirmation for each.

The contractor 401(k) may include a Roth 401(k) bucket and an employer-match Traditional bucket. The Roth 401(k) portion travels as a direct rollover to a Roth IRA at the same custodian; the Traditional bucket goes to the Traditional IRA. The plan administrator issues the 1099-R for each leg separately.

The self-directed IRA custodian opens both account types in a single application if needed. The result, at the end of a consolidation cycle, is two IRAs at one custodian holding the full retirement balance, with the Roth basis isolated from the Traditional pre-tax portion.

From that point forward the participant can direct metals purchases inside each IRA according to the desired allocation. The broader procedural framework for moving funds into a gold IRA without penalty is covered in our 401(k)-to-gold-IRA rollover guide.

Frequently asked questions on TSP Modernization Act partial withdrawals

How many partial withdrawals can I take from my TSP in one calendar year?

The TSP Modernization Act removed the lifetime cap on partial withdrawals. A separated participant can take a partial withdrawal once every 30 calendar days, which works out to a theoretical maximum of about 12 partial withdrawals per year. The 30-day clock runs from the prior payout disbursement date, not from the request submission date.

Each partial must be at least $1,000. There is no annual dollar cap. Active participants age 59 and a half or older can take age-based in-service withdrawals on the same 30-day spacing without separating from service.

Does a partial withdrawal trigger the 10% early-withdrawal penalty if I am under 59 and a half?

A partial withdrawal taken as a direct trustee-to-trustee rollover to a Traditional or Roth IRA does not trigger any tax or penalty because no distribution is recognized.

A partial withdrawal taken as a cash distribution does trigger ordinary income tax on the pre-tax portion. It may also trigger the 10% early-withdrawal penalty under IRC §72(t) if the participant is under 59 and a half, unless an exception applies.

The two most common exceptions for federal employees and service members are the separation-from-service-at-age-55 exception under IRC §72(t)(2)(A)(v) and the public-safety officer separation-at-50 exception under IRC §72(t)(10). Substantially equal periodic payments (SEPP) under IRC §72(t)(2)(A)(iv) is a third route but requires a 5-year or until-59.5 commitment.

Can I roll part of my Traditional TSP to a Roth IRA and part to a Traditional IRA in the same withdrawal?

Yes, under IRS Notice 2014-54. The Modernization Act formalized the split-rollover capability inside the tsp.gov withdrawal form. The basis portion of a Traditional TSP balance (combat-zone tax-exempt contributions if applicable) can be routed to a Roth IRA, where it grows tax-free, and the pre-tax portion can be routed to a Traditional IRA.

Both transactions appear on a single Form 1099-R from the TSP. The basis amount appears in Box 5, and Box 2a remains at $0 because the basis goes to Roth and the pre-tax portion goes to Traditional. Both receiving IRAs must be open at the time of the withdrawal request.

If I start TSP monthly installments, can I still take partial withdrawals?

Yes. The Modernization Act explicitly allowed the combination. A participant can have monthly installment payments running and request partial withdrawals on the same 30-day spacing rule. The installment amount or basis can also be changed at any time without forfeiting any future partial-withdrawal option. Under the pre-2019 rule set, this combination was prohibited; a participant who started installments lost access to partials entirely. The new framework is structurally more flexible than most private-sector 401(k) plans.

Does the Modernization Act apply to FERS, CSRS, and uniformed-service participants the same way?

Yes. The Modernization Act amended the underlying Federal Employees’ Retirement System Act of 1986 provisions governing the Thrift Savings Plan and applies uniformly to FERS, CSRS, and uniformed-service participants.

The TSP is a single plan with the same rule set across all three populations. The only structural difference at the participant level is the agency match. FERS includes a 1% automatic and up to 4% matching contribution; CSRS includes neither. Uniformed-service participants on the Blended Retirement System receive 1% automatic and up to 4% matching, while legacy High-3 system service members receive none.

The partial-withdrawal mechanics, Modernization Act rule set, and tax treatment at the rollover step are identical across populations.

More on OPRS

• TSP to gold IRA rollover: federal employee guide. The full procedural pillar that sits above the Modernization Act partial-withdrawal mechanism described on this page.
• TSP combat-zone tax-exempt contributions and gold IRA rollovers. The basis-tracking layer that interacts with every partial withdrawal from a CZTE-affected Traditional TSP balance.
• Can I move my 401(k) to a gold IRA without penalty? The contractor-401(k) consolidation primer that runs in parallel with the Modernization Act partial sequence.

Sources cited

1. TSP Modernization Act of 2017, Public Law 115-84: partial TSP withdrawal rule changes (Congress.gov)
2. 5 CFR Part 1650: TSP withdrawal and distribution regulations (eCFR)
3. Thrift Savings Plan: participant guidance and withdrawal options (TSP.gov)
4. Federal Retirement Thrift Investment Board: TSP regulations and rulemaking (FRTIB.gov)
5. IRS Notice 2014-54: allocation of after-tax and pretax distributions from qualified plans (IRS.gov)
6. IRS Publication 590-A: Contributions to Individual Retirement Arrangements (IRS.gov)
7. IRS Publication 590-B: Distributions from Individual Retirement Arrangements (IRS.gov)
8. IRS Publication 3: Armed Forces’ Tax Guide (IRS.gov)
9. IRC §72(t): early-withdrawal penalty exceptions including combat-zone rules (Cornell Law)
10. IRC §408: Individual Retirement Account rules (Cornell Law)
11. Bobrow v. Commissioner, T.C. Memo. 2014-21: one-per-12-month indirect rollover rule (ustaxcourt.gov)
12. McNulty v. Commissioner, 157 T.C. No. 10 (2021): home-storage gold IRA rejected by the U.S. Tax Court (ustaxcourt.gov)