TSP Withdrawal Order: Which Money to Spend First in a FERS Retirement
A FERS retirement usually means four money streams: the annuity, Social Security (plus the supplement for some), the TSP, and whatever you've saved outside. The pension and Social Security arrive on their own schedule — the TSP is the one you control. And the order you draw it, relative to everything else, is one of the few levers that can add or subtract real money without changing how much you saved.
First, the disclaimer that matters: withdrawal sequencing is genuinely personal — tax brackets, spousal income, health costs, and state taxes all move the answer. What follows is the standard framework, not a prescription.
The default framework
The classic order for retirees generally runs: taxable accounts first, traditional (pre-tax) second, Roth last. The logic: taxable money is already partly taxed each year anyway; traditional TSP withdrawals are ordinary income you'd rather take in your lowest-bracket years; Roth money grows tax-free and is the best asset to touch last or leave to heirs.
For FERS people specifically, three system quirks bend that default:
1. The age-55 rule (and 50 for special category)
Money in your TSP escapes the 10% early-withdrawal penalty if you separate from service in or after the calendar year you turn 55 (50 for law enforcement, firefighters, ATCs — and special-category rules were further liberalized in recent law). An IRA rollover loses this: IRAs make you wait until 59½. If you're retiring at 56–58 and will need TSP money before 59½, think hard before rolling everything to an IRA — the TSP's age-55 access is worth protecting.
2. The low-bracket window before Social Security
Retire at 58–62 and there's often a stretch where your only taxable income is the annuity (the FERS supplement, where applicable, is taxable too but modest). These are your cheapest tax years — possibly ever. Two standard uses: draw traditional TSP up to the top of a low bracket to live on, or convert traditional balances to Roth in measured slices. Filling low brackets now can shrink the required withdrawals that hit later.
3. RMDs are the deadline
Traditional TSP balances face required minimum distributions (age 73 for those born 1951–1959, 75 for 1960 or later, under current law). A large untouched traditional balance meeting RMDs at 73+ — stacked on the annuity and Social Security — is how retirees get pushed into higher brackets and IRMAA Medicare surcharges. Note: Roth TSP no longer has RMDs (fixed in 2024), so there's no longer a reason to roll Roth TSP to a Roth IRA purely to dodge them.
A FERS-shaped sequence, in words
Bridge years (retirement to ~62): live on annuity + supplement + taxable savings; use spare low-bracket room for traditional TSP draws or Roth conversions. Age 62–RMDs: layer in Social Security when claiming math says so; keep managing brackets. RMD years: required traditional draws + everything else; Roth remains the flexible, tax-free topper for lumpy expenses.
FAQ
Does the TSP let me choose which pot (traditional vs Roth) a withdrawal comes from?
Yes — since 2022 you can direct withdrawals to traditional, Roth, or a mix. Older all-pro-rata advice is stale.
Is my FERS annuity taxable?
Mostly yes (a small portion is return of your own contributions). Most states tax it too, though several exempt some or all government pensions.
Should I annuitize part of my TSP?
That's a personal-risk question beyond a blog post — model it, and treat any irreversible option with respect.
See your projected retirement income. The FERS Report calculator estimates annuity, supplement, and TSP income. The $79 Complete report adds eligible retirement-date scenarios, lifetime totals, and a year-by-year income table.
Educational content only — not financial, tax, or legal advice. Tax rules change; confirm current thresholds with IRS/TSP.gov or a qualified professional.