TSP Hardship Withdrawal Rules 2026: What Most Sites Get Wrong

Last Updated: February 19, 2026 Reading Time: 11 min

If you search "TSP hardship withdrawal" right now, most of the results will tell you that taking one suspends your TSP contributions for 6 months.

That hasn't been true since September 2019.

The TSP Modernization Act eliminated the contribution suspension over six years ago, but FedSmith, financial advisor blogs, and half the Reddit threads about this topic still cite the old rule. If you're making a decision about your retirement savings based on that outdated information, you could be miscalculating the real cost.

Here's what the rules actually are in 2026, who qualifies, what it costs, and why a TSP loan is almost always the better choice.

Key Takeaways

• Five qualifying conditions: negative cash flow, medical expenses, casualty loss, divorce legal fees, and FEMA disaster losses
• You can only withdraw your own contributions and earnings, not agency matching or automatic 1%
• The 6-month contribution suspension was eliminated in 2019. Your contributions continue after a hardship withdrawal. Many websites still get this wrong.
• If you're under 59.5, you owe a 10% early withdrawal penalty on top of regular income tax. There is no hardship exemption.
• Hardship withdrawals are up roughly 20% in 2025 vs. 2024, averaging about 52,000 per month
• A TSP loan is almost always the better option. Loans avoid taxes, penalties, and permanent account reduction.

The five qualifying conditions

You can't take a TSP hardship withdrawal for any reason. Federal regulation 5 CFR 1650.32 lists exactly five qualifying conditions:

1. Negative monthly cash flow. Your recurring monthly expenses exceed your recurring monthly income. The TSP provides a worksheet to calculate this. It must be an ongoing pattern, not a one-time shortfall.

2. Unpaid medical expenses. For you, your spouse, or your dependents. Includes household modifications needed for medical care like a wheelchair ramp. Must be unpaid; expenses already covered by insurance don't qualify.

3. Personal casualty loss. Property damage from fire, theft, natural disaster, or accident that isn't covered by insurance.

4. Legal expenses for separation or divorce. Unpaid attorney fees and court costs related to separation from or divorce from your spouse. Other legal matters don't qualify.

5. FEMA-declared disaster losses. Added in October 2020. Your home or workplace must be in a FEMA-designated area for individual assistance. Covers any expense from the disaster, including medical, funeral, property, and income loss.

You self-certify your hardship under penalty of perjury. The TSP doesn't verify your claim, but making a false certification is a federal offense.

How much you can withdraw

Minimum: $1,000

Maximum: The lesser of your actual hardship amount or your own employee contributions plus their earnings.

What you can't withdraw:

• Agency Automatic 1% contributions
• Agency matching contributions
• Earnings on agency contributions

If you've transferred money from a traditional IRA or another employer plan into your TSP, those rolled-over amounts can be withdrawn as part of a hardship.

The contribution suspension myth

This is the biggest piece of misinformation about TSP hardship withdrawals.

Before September 15, 2019: Taking a hardship withdrawal triggered a mandatory 6-month suspension of your TSP contributions. This also meant losing 6 months of agency matching for FERS employees.

After September 15, 2019 (current rule): The contribution suspension was eliminated by the TSP Modernization Act. Your contributions continue uninterrupted after a hardship withdrawal.

What still applies: You cannot take another hardship withdrawal for 6 months after the previous one. This 6-month spacing rule between withdrawals is separate from the eliminated contribution suspension.

The distinction matters because the contribution suspension was one of the biggest arguments against hardship withdrawals. Without it, the real costs are taxes, the penalty, and lost compound growth, not lost matching.

Tax rules (and the penalty nobody expects)

Federal tax withholding

The TSP withholds 10% of the taxable portion by default. You can change this to any percentage, including 0%.

Changing the withholding doesn't change your tax bill. It just changes how much is withheld upfront. If you set withholding to 0%, you'll owe the full amount when you file your taxes.

What you actually owe

Traditional TSP hardship withdrawals are taxed as ordinary income at your marginal federal rate. If the withdrawal bumps you into a higher bracket, part of it gets taxed at that higher rate.

The 10% early withdrawal penalty

If you're under age 59.5 when you take the withdrawal, you owe an additional 10% penalty on top of your regular income tax. This is assessed when you file your annual return (IRS Form 5329).

Here's what catches people: a TSP hardship withdrawal does not qualify for a penalty exemption. Unlike some private-sector 401(k) plans that may exempt certain disaster distributions, the TSP hardship withdrawal has no built-in penalty exception. If you're under 59.5, you pay the 10%.

Example: What a $15,000 hardship withdrawal actually costs

If you're in the 22% federal tax bracket and under 59.5:

Item	Amount
Withdrawal	$15,000
Federal tax (22%)	$3,300
10% early penalty	$1,500
State tax (5% estimate)	$750
Total tax hit	$5,550
What you actually keep	$9,450

You withdraw $15,000 but only keep $9,450 after taxes and penalties. And that $15,000 is permanently gone from your retirement account.

Roth TSP hardship withdrawals

If you withdraw from your Roth TSP balance, the rules are different, and more complicated.

Pro-rata distribution: The TSP distributes Roth hardship withdrawals proportionally between contributions and earnings. You can't withdraw just your contributions the way you can with a Roth IRA.

Example: If your Roth balance is 70% contributions and 30% earnings, a $10,000 withdrawal is $7,000 contributions (tax-free) and $3,000 earnings.

Earnings are taxable unless the distribution is "qualified," meaning you're 59.5+ and have had Roth TSP for 5+ years. For most people taking a hardship withdrawal, the earnings portion is taxable and subject to the 10% penalty.

TSP hardship withdrawal vs. TSP loan

A TSP loan is almost always better. Here's the side-by-side:

Feature	Hardship Withdrawal	TSP Loan
Must repay?	No, permanent	Yes, payroll deductions
Taxable?	Yes, immediately	No (unless you default)
10% penalty if under 59.5?	Yes	No (unless you default)
Impact on contributions	None (post-2019)	None
Impact on agency match	None (post-2019)	None
Processing fee	None	$50 (GP) or $100 (residential)
Impact on retirement	Permanent reduction	Temporary
Interest	N/A	G Fund rate, paid back to your account

A hardship withdrawal permanently removes money from your account. A loan temporarily moves it, and you repay yourself with interest.

The only times a hardship withdrawal makes sense:

• You already have the maximum 2 TSP loans outstanding
• You can't afford loan repayments on top of your existing expenses
• Your need exceeds the $50,000 loan cap
• You're about to separate and can't take a new loan

If you're about to be separated (RIF, VERA, resignation), do not take a hardship withdrawal. Wait for separation and use post-separation withdrawal options instead. After separation, you can access all funds (including agency contributions), may qualify for the Rule of 55 penalty exemption, and have more flexibility.

How to apply

Online (recommended)

1. Log in to My Account at TSP.gov
2. Go to "Withdrawals and Changes to Installment Payments"
3. Select "Financial Hardship" withdrawal
4. Answer the guided questions
5. Certify your hardship under penalty of perjury
6. If FERS: spouse consent section must be completed (notarized signature required)
7. Submit

Processing timeline

Step	Time
Submit request	Day 0
TSP reviews and processes	7-10 business days
Direct deposit arrives	1-3 business days after processing
Mailed check arrives	5-7 additional business days
Total (direct deposit)	10-14 business days

Tips: use the online application (faster than paper Form TSP-76), make sure your bank account is already linked to avoid a 7-day new-bank waiting period, and get spousal consent notarized before you start.

Hardship withdrawals are surging in 2025-2026

TSP hardship withdrawals have increased roughly 20% in 2025 compared to 2024, according to FedWeek. The numbers: about 52,000 per month at an average of $10,400 each, up from roughly 26,000 per month in 2024.

The reasons track with what you'd expect: government shutdown anxiety, RIF fears, DOGE-related agency restructuring, and the general financial stress of a workforce in flux. The 40-50 age group has the highest hardship usage rate. The lowest-paid federal employees (bottom quintile) take hardship withdrawals at the highest rate: 8.47%.

If you're in this situation, explore a TSP loan first. If you're facing separation, see the VERA/VSIP Guide or RIF Survival Guide before making any TSP decisions.

Model the impact on your retirement

Use the TSP Calculator to see how a hardship withdrawal affects your projected retirement balance. A $10,000 withdrawal at age 40 could cost you $40,000+ in lost growth by age 65 at 6% returns. Run your numbers before deciding.

Model Your TSP Balance →

Frequently asked questions

What qualifies as a financial hardship for TSP withdrawal?

The TSP recognizes five qualifying conditions under 5 CFR 1650.32: negative monthly cash flow, unpaid medical expenses for you or dependents, personal casualty loss not covered by insurance, unpaid legal fees for separation or divorce, and losses from a FEMA-declared major disaster. You must self-certify the hardship under penalty of perjury.

How much can I withdraw from TSP for hardship?

The minimum is $1,000. The maximum is the lesser of your actual hardship amount or your own employee contributions plus their earnings. You cannot withdraw agency matching contributions or the Agency Automatic 1%, only your own money.

Do I pay a penalty on a TSP hardship withdrawal?

If you're under age 59.5, yes. You owe a 10% early withdrawal penalty to the IRS on top of regular income tax. The TSP withholds 10% for federal tax by default, but the actual penalty is separate and assessed when you file your tax return. There is no hardship exemption to the penalty for TSP.

How long does a TSP hardship withdrawal take to process?

Typically 7-10 business days from submission. With direct deposit to an already-linked bank account, funds arrive 1-3 business days after processing. Total is about 10-14 business days. Mailed checks add 5-7 days.

Can I still contribute to TSP after a hardship withdrawal?

Yes. Since September 15, 2019, the TSP Modernization Act eliminated the old rule that suspended contributions for 6 months. Your contributions and agency matching continue uninterrupted. You can't take another hardship withdrawal for 6 months, but your contributions aren't affected. Many websites still incorrectly cite the old suspension rule.

Is a TSP loan better than a hardship withdrawal?

In nearly all cases, yes. A TSP loan avoids taxes and penalties entirely. You repay yourself with interest at the G Fund rate through payroll deduction. A hardship withdrawal is taxed as ordinary income, may carry a 10% early penalty, and permanently removes money from your retirement account.

Related resources

• TSP Calculator: Model how a hardship withdrawal affects your retirement balance
• TSP Loans Guide 2026: The better alternative for most situations
• TSP Withdrawal Guide 2026: Post-separation withdrawal options, RMDs, and Rule of 55
• TSP Guide 2026: Complete guide to TSP funds, limits, and strategies
• VERA/VSIP Guide 2026: Early retirement and buyout eligibility
• RIF Survival Guide 2026: If you're facing a reduction in force
• Government Shutdown Guide 2026: How shutdowns affect your TSP and pay

Sources: TSP.gov Financial Hardship Withdrawal, 5 CFR 1650.32, TSP Bulletin 19-9, IRS Exceptions to Early Distributions, FedWeek: TSP Cash Flow, FRTIB Annual Report 2024