Federal Layoffs: 5 TSP Moves to Make Before You’re Out

April 14, 2025

The pink slips are flying, hiring is frozen solid, and job roles are being reclassified faster than you can say “Schedule Career/Policy.”

If you’re a federal employee, one thing’s clear: no position is as safe as it used to be.

Maybe you’re months from retirement. Maybe you’ve still got decades to go.

Either way, if your paycheck could disappear tomorrow, your TSP strategy needs to change today.

In this issue, we’re giving you 5 critical TSP moves to protect your retirement savings before your badge stops working.

No fluff. No panic. Just the smart steps to help you walk away with your money intact—and your future still on track.

1. Maximize Contributions While You Still Can

Your contributions—and agency matching if under FERS—stop the moment you're no longer on payroll.

If you're still employed:

  • Increase your TSP contribution to hit the IRS limit ($23,000 in 2025) or as close as possible.

  • Over age 50? Take advantage of catch-up contributions—an additional $7,500 this year. Even a few months of higher contributions can make a significant difference over time.

2. Review Your TSP Allocation for Liquidity

In uncertain times, preservation of capital matters, making it a good time to reevaluate your fund choices:

  • Nearing retirement? Consider shifting some assets to G Fund for stability.

  • Still long-term? Balance between C, S, and I Funds for growth, but keep enough in liquid or low-volatility assets in case you need to access funds early.

3. Understand Your Withdrawal and Loan Options

Layoffs don’t eliminate your access to your money—but there are important rules:

  • Loans: You must repay TSP loans (or have them counted as taxable distributions) after separation.

  • Withdrawals: If under 59½, early withdrawal penalties may apply—but there are exceptions for those who separate at or after age 55 (or 50 for certain special categories like law enforcement).

4. Plan for a Rollover—But Don’t Rush It

If you don’t land another federal position soon, you’ll need a long-term plan:

  • You can leave your money in TSP (and it will still grow), but you can no longer contribute.

  • You can roll over to an IRA—which may offer more flexibility—but be careful to avoid taxable mistakes.

  • Don't cash out unless it's an emergency; it’s often the most damaging move to long-term wealth.

5. Build a Transition Budget Using Your TSP as a Buffer (Last Resort)

Ideally, your TSP stays untouched for retirement. But if you’re laid off unexpectedly:

  • Calculate your monthly income gap.

  • Explore all non-TSP emergency funds first.

  • If needed, consider a partial withdrawal or a substantially equal periodic payment (SEPP) plan to access funds penalty-free.

Stay Informed. Stay Prepared.

The Thrift Savings Plan is a powerful retirement tool—but only if used strategically.

In a time of upheaval, your decisions now can protect decades of growth and financial peace later.

Now’s the time to stay calm and make smart, strategic moves for the future.