When I separated from the USAF in 2006, I faced a decision regarding my Thrift Savings Plan (TSP). Since I would no longer be a member of the armed forces, I could no longer contribute to the TSP. So what should I do? In the end, I decided to leave the money in there, but I’ll walk you through your options and their pros and cons so you can make an informed decision if the need ever arises.
Table of Contents
- Key Takeaways
- Can I contribute to the TSP after I leave the military?
- 5 Options for Your TSP Account After Separation
- 1. Leave TSP Assets in Your Account
- 2. Roll Your TSP Assets Into A Traditional IRA
- 3. Roll Your TSP Assets Into Your Employer’s 401(k) plan
- 4. Transfer Your TSP Assets To a Qualified Annuity
- 5. Withdraw Your TSP Assets In a Lump Sum
- The best option?
- Other Retirement Plan Options
- Keep Saving for Retirement
Key Takeaways
- The Thrift Savings Plan is similar to a civilian 401(k) plan. Members contribute pre-tax money into their account and only pay taxes when they withdraw.
- After leaving the military, members have several options to manage their assets. These include keeping them in the account, rolling them into an IRA or employer’s 401(k) plan, withdrawing them as a lump sum, or transferring them to a qualified annuity.
- Each option has advantages and disadvantages. For example, the TSP offers low fees, an IRA provides more investment options, and a lump sum withdrawal may lead to tax penalties.
Can I contribute to the TSP after I leave the military?
When your employment ends with the military or civil service, you can no longer contribute to your TSP account. However, your account remains active, meaning you have several options for managing your funds. We’ll look at five strategies for managing your Thrift Savings Plan after leaving the military and the advantages and disadvantages of each option. I’ll also share which strategy I ended up choosing and why.
5 Options for Your TSP Account After Separation
- Leave the assets in your TSP account.
- Roll your assets into an IRA.
- Roll your assets into your new employer’s 401(k) plan.
- Transfer your TSP assets to a qualified annuity.
- Withdraw your TSP assets in a lump sum.
Let’s take a closer look at the pros and cons of each option.
1. Leave TSP Assets in Your Account
The easiest thing to do is leave your assets in your TSP account. However, you need to keep in mind that you will not be able to make additional deposits to your account once you are no longer part of the uniformed services or civil service.
Pros
- Continues to grow
- Easy to use
- Low Fees
If you leave the money in your TSP account after leaving the military, it continues to grow based on the performance of the investments you’ve chosen. The TSP is also easy to use, and while it doesn’t have many investment choices, the fees are among the lowest you can possibly find—even lower than most popular index funds. You always have the option of moving your funds from the TSP at a later date. There are also special tax considerations if you invested in your TSP while deployed to a war zone.
Read more about the advantages of investing in the TSP.
Cons
- Can no longer contribute
- Limited investment options
Once you leave the military, you can no longer contribute to your TSP, meaning no more matching contributions if you’re a Blended Retirement System member. There are also only five main funds to choose from and a few target funds. You are also unable to make new contributions or take loans from your old TSP account. Having one more account to keep track of can also be a headache for some people. Not only does it involve more work when balancing your assets, but you also must maintain more paperwork.
Read more about the disadvantages of investing in the TSP here.
Verdict: The fees charged to manage the Thrift Savings Plan are probably the lowest you will ever find. Consider leaving your funds in the TSP unless you want more investment options.
Track your TSP and other investments with Personal Capital’s free financial dashboard.
2. Roll Your TSP Assets Into A Traditional IRA
An IRA (Individual Retirement Account) is a popular tax-advantaged account designed to help individuals save for retirement. There are two main types of IRAs: traditional and Roth. Like a TSP, contributions are made with pre-tax dollars, meaning you can deduct them from your taxable income in the year you contribute. The money grows tax-deferred, and you pay taxes when you withdraw it in retirement.
If you enjoy hands-on investments, rolling over your TSP into an IRA can be a great option.
Pros
- Avoids the 10% early withdrawal penalty
- Tax advantages
- More investment options
Perhaps the biggest advantage of rolling your TSP into an IRA is avoiding the 10% early withdrawal penalty, a fee imposed by the IRS when you withdraw money from a tax-advantaged retirement account before the age of 59½. Another advantage of a traditional IRA is that you get total control, meaning you have full authority over how your retirement funds are invested and managed. Unlike employer-sponsored plans like the TSP or 401(k), a traditional IRA typically gives you access to a wide range of investment choices, such as:
- Stocks
- Bonds
- Mutual funds
- ETFs (Exchange-Traded Funds)
- CDs (Certificates of Deposit)
- Real estate (in the case of self-directed IRAs)
An IRA also allows you to maintain certain tax advantages, such as tax-deductible contributions.
Cons
- Can’t take loans from a traditional IRA
- More difficult to make withdrawals
The TSP allows participants to take loans under certain conditions (like purchasing a home or helping with financial hardship) and to repay the loan over time without incurring taxes or penalties. However, this option doesn’t exist with a traditional IRA. If you need access to the funds before retirement, you’d have to withdraw them, which could trigger taxes and penalties, making it less flexible for short-term financial needs.
Additionally, traditional IRAs generally have stricter withdrawal rules compared to the TSP. While you can make penalty-free withdrawals from a TSP if you leave federal service after age 55, with a traditional IRA, you must wait until age 59½ to avoid the 10% early withdrawal penalty.
Verdict: Consider this option if you want total control over your investments, you want more investment options, your new employer’s 401(k) plan does not offer strong investment options, or you want to consolidate your investment holdings into fewer accounts.
3. Roll Your TSP Assets Into Your Employer’s 401(k) plan
If your new employer’s 401(k) plan has strong investment options and low expense ratios, rolling your TSP into a 401(k) is an especially great option.
Pros
- Keeps tax advantages
- No penalties or fees for transferring your money
- Ability to borrow from your 401(k) account
When you roll your TSP into a 401(k), your retirement savings maintain their tax-deferred status. This means you won’t pay taxes on the funds during the rollover, and the money continues to grow tax-deferred until you withdraw in retirement. Additionally, rolling your TSP into a 401(k) is typically a penalty-free process as long as you perform a direct rollover, meaning the money goes straight from your TSP to your new 401(k) account without passing through your hands.
Lastly, unlike a traditional IRA, most 401(k) plans allow you to take loans against your retirement savings. This can be a significant advantage if you ever need access to your funds before retirement for major expenses like a home purchase, education, or medical costs. Typically, 401(k) loans must be repaid with interest, but you won’t face the same tax penalties as with early withdrawals.
Cons
- Limited investment options
- Waiting period in some cases
Like the TSP, you have limited investment options with a 401(k). This is important if your new 401(k) plan has an especially small number of investment options or higher-than-average expense ratios, which cause lower returns.
Some employers have a minimum waiting period before signing up for their 401(k) plan, so you may have to wait before you can roll over your TSP assets. During this waiting period, your investments may remain stagnant, and you might miss out on potential growth or other opportunities.
Verdict: Consider this option if your employer’s plan has strong investment options and/or you want to reduce the number of retirement accounts you need to maintain.
4. Transfer Your TSP Assets To a Qualified Annuity
A rarer option is to transfer your TSP assets into a qualified deferred annuity. Few people are aware of this option, and few people use it.
An annuity is an insurance product. In exchange for a lump sum, an insurance company guarantees to pay you a steady income, often for the rest of your life. It provides a way to ensure a steady stream of income later in life while delaying taxes on your earnings until you start withdrawing the funds.
Pros
- No limit on the amount of money you can contribute
- Flexible payout options
- Can be inherited
Unlike retirement accounts like a TSP or IRA, which have annual contribution limits, annuities do not impose a cap on the amount of money you can transfer or invest. Many annuities also offer flexible payout options. You can choose to receive payments for a set number of years, for the rest of your life, or even for both your life and your spouse’s life (joint annuity). Many annuities also come with death benefits, ensuring that any remaining funds in the account can be inherited by your beneficiaries, often as a lump sum or a stream of income.
Cons
- Can’t be reversed
- Potentially higher fees than other options
- Complex
Rolling your TSP into an annuity is final. Once it has been done, it cannot be reversed. This means that if you later change your mind or find a better investment option, you won’t be able to move your money back into the TSP or another retirement vehicle. You’re locked into the annuity contract, which can limit your flexibility and financial options in the future.
Many annuities also come with much higher fees than 401(k) plans and IRAs, and many states charge high tax premiums on annuity plans. These fees can include administrative costs, mortality and expense charges, and commissions paid to the annuity provider or agent.
Additionally, when you purchase an annuity, you’re essentially trading a lump sum of money for a guaranteed stream of income over your lifetime. However, if you pass away shortly after starting the annuity, you may not have received as much in payouts as you originally contributed. For example, if your annuity contract doesn’t include specific provisions for a death benefit or payments to beneficiaries, the remaining balance could be lost, leaving little to nothing for your heirs.
In contrast, with a 401(k) or IRA, the remaining balance typically passes to your heirs when you die, and they can inherit the account.
Verdict: Annuities are not necessarily bad, but they are often complicated and have many associated variables. If you think an annuity may be for you, consider talking to a certified financial planner or other tax or retirement professional for more details. One more note concerning annuities: beware of salesmen. Many annuities are given the hard sell because they are often extremely profitable for the investment management company.
5. Withdraw Your TSP Assets In a Lump Sum
Withdrawing your Thrift Savings Plan assets in a lump sum is not usually recommended because you will be assessed with taxes (usually 20%) and early withdrawal penalties (10%). Together, these can eat up nearly a third of your total TSP assets. However, there are scenarios where it would be beneficial.
Pros
- Immediate access to funds
- Potential for better investment opportunities
The biggest advantage of withdrawing your TSP is having complete control over how and when to use the money. Your assets (minus income taxes and early withdrawal penalties) are available immediately. This can help during periods of unemployment after separating from the military or civil service.
Additionally, if you believe you can invest the lump sum more effectively outside the TSP (e.g., in higher-yield investments), this option could provide greater growth potential. However, that is a great risk to take.
Cons
- 10% early withdrawal penalty
- Immediate tax liability
- High risk of management
The huge tax payment and the 10% early withdrawal penalty (if you are under age 59½) reduce the amount you receive by almost a third. In addition, you also lose tax deferral benefits and potential future earnings and lock in any market losses. Most importantly, you reduce the amount of money you have for your retirement.
The full lump sum is also subject to income tax in the year you withdraw it. Depending on the size of your TSP, this could push you into a higher tax bracket, resulting in a significant tax bill.
You can change your mind within 60 days. The law requires your old fund manager to deduct 20% of your withdrawal for taxes at the time of withdrawal. If you change your mind, there is a 60-day rollover rule that allows you to roll the money into an IRA within 60 days. However, you are required to come up with the 20% difference to reinvest the entire amount and avoid paying income taxes. You get the 20% back when you file taxes the following year as long as you complete the rollover within 60 days.
Verdict: Consider this option only if you need the funds immediately and cannot meet those expenses through other means, but I strongly advise you to speak with a financial planner to look at other options before doing this.
The best option?
In most cases, the best option is to transfer your TSP assets to your new 401(k) plan or an IRA or leave them in the TSP account. However, your decision should be based on your situation.
I chose to leave my TSP alone because the portion of money you invest in your TSP account while in a tax-free combat zone remains tax-free, even when you withdraw it during retirement. I deployed five times while in the service, so I was able to invest a decent amount of tax-free money in my TSP.
Do you have a 401(k) plan you need to transfer? Then check out this article that looks at options for rolling over a 401(k) account: Should you consolidate 401(k) accounts?
Other Retirement Plan Options
Just because you won’t be able to contribute further to your TSP account doesn’t mean you should stop saving for retirement. It is almost always a good idea to save for retirement. Here are some places you can invest if you plan on saving more for retirement:
Civil Service TSP
The TSP for civil service workers is virtually the same as the plan for military members. Like members of the BRS plan, most civil servants are eligible for employer matching, which is where the government makes contributions to your account for you. The government gives you a small contribution just for participating. Then, they match your contributions up to a certain percentage. Taking advantage of this plan is highly recommended, as the employer match is essentially free money and part of your employer benefits.
Roth IRA
One of the benefits of investing in IRAs is that they are open to anyone who has earned income – even if you are participating in an employer-sponsored retirement plan. It is possible to have multiple retirement accounts as long as you don’t exceed the relevant contribution limits in any given year. You can also have IRA accounts with multiple IRA providers, again, as long as you don’t exceed IRA contribution limits. For ease of bookkeeping, however, it is much easier to maintain your accounts in as few places as possible.
Self-Employed Retirement Accounts
If you have your own business, you may be able to open a self-employed retirement account, such as a Solo 401(k), SEP IRA, Keough, or another self-employed retirement account. If you are self-employed, I strongly recommend meeting with an accountant to help you determine which business structure and retirement plan are best for your needs (sometimes your business structure determines which type of self-employed retirement plan account you are eligible for).
Important Note About Contribution Limits: Thrift Savings Plan contribution limits are the same as other employer-sponsored retirement plans, such as the civilian TSP, 401(k) plans, 401(b) plans, etc., and the limits apply across all accounts. This is good to know if you contribute to the military TSP and another employer-sponsored retirement plan in the same year.
Keep Saving for Retirement
Even if you decide to withdraw your TSP or choose to transfer it to an annuity, it is a good idea to continue saving for retirement. People are living longer now than ever before, and the cost of living will only continue to rise due to inflation. You may also find that saving for retirement will give you tax breaks now or in the future and potentially give you various ways to manage your investments and, ultimately, your estate.
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GeeJay says
Hello Ryan, this year I want to begin Roth conversion. I separated from the military in 2006. My military TSP account was about 70K, with about 10K as tax exempt. In DEC 2014, I moved my TSP monies to Vanguard. In early 2015, I requested that the 10K tax exempt monies be moved to a Roth account. Vanguard told me that they couldn’t do this, as the tax-exempt monies were co-mingled with the tax-deferred monies. I don’t know if this answer is correct. In the TSP, my tax-exempt monies were co-mingled with my tax-deferred monies. When I requested my monies be moved to Vanguard, TSP was able to de-mingle the tax-exempt from the tax-deferred. What are my options? Obviously, moving/rolling the 10K tax-exempt directly into a Roth account would be best. If I cannot do this, how do I create a basis for the 10K, so I don’t get taxed on it? If the 10K is tax-exempt, I do not want to pay tax on this. Thanks.
Ryan Guina says
Thank you for your question, GeeJay. I suggest working with a financial professional with experience with TSP transfers. I transferred my TSP to USAA before they sold their investment practice. Their customer service representatives had a lot of experience working with tax-exempt rollovers and were very helpful in ensuring the funds remained separate when transferred from the TSP. I believe there were two separate transfers, one for the taxable funds, and one for the tax-exempt funds. The taxable funds went into a Traditional IRA, and the tax-exempt funds went into my Roth IRA. If I recall correctly, there was a way to request this from the TSP when I made the transfer.
Unfortunately, I made this transfer about 15 years ago and the process has changed, so I am unable to provide step-by-step instructions. Your situation is something that requires hands-on attention from an experienced professional.
I wish you the best!
Jim Bratton says
Where is the form to roll into a qualified retirement account? It’s not on anywhere on the TSP website.
Brittany Crocker says
Hey Jim! This TSP fact sheet should point you in the right direction! https://www.tsp.gov/publications/tspfs05.pdf
Mels29 says
This was awesome advice! I love reading and learning from the comments. I should have invested more into my TSP. Right now my account is just sitting there. I am 38 and want to maximize the amount for my retirement. I would also like to find a federal position to make more contributions to my TSP. I separated in 2013 and I noticed the amount did increase.
Thomas Moeller says
One option is to convert your after-tax contribution into a Roth-IRA. All of my contributions made during my active duty service were “after tax”. Those funds can have maximum investing options.
Gloria Sloan says
Aloha and thank you for reading my question. I was in the Air Force in the early 1990s and separated in 1996. Basically, I have forgotten about my TSP account and now I am trying to gain access to it but of course, I don’t know my account number. The TSP agent told me that I needed to fax a letter requesting my account number so I did that yesterday. There is approximately $9,000 according to my last TSP statement that I found in the basement. Do you think my account has grown from the time I separated from the Air Force in the ’90s? Or would it be about the same amount that I had left it since I haven’t been able to make any contributions?
Ryan Guina says
Hello Gloria,
The TSP was first made available to military members in 2001. If you have a TSP account, it would be from service after that timeframe, or it would be from civilian government service.
If you have a TSP statement, you should have some account information on it. I would have your statement available when you call the TSP customer service agent.
Regarding the account balance, yes, it should have continued growing in the time the funds have been in your account. How much is in it is impossible to guess. You would need to work with the TSP customer service to gain access to your account.
Best wishes.
Troy says
As of October 3, 2019, I have been separated from the ARNG and will soon be retired from federal service due to my position required I be a member of the NG. Because of a medical condition I have been deemed unfit for duty therefore here we are. I have a Civilian and a Uniformed TSP account. How long does it usually take for someone to receive notice they need to do something with the uniformed account? For one of my E7’s that recently was medically retired it was only three weeks. ??
Ryan Guina says
Hello Troy,
I’m sorry to hear you will be forced to leave the service. Hopefully, you will be able to find another job within the civil service that will not require you to serve in the military to hold your civilian job. That way you can continue your career and continue to accrue retirement benefits in the civilian sector.
Regarding your TSP accounts –
The TSP does not require members to remove their funds from the TSP when they leave either the military service or civil service.
You can leave your funds in each of the accounts as long as you would like to do so (or until you reach the age of Required Minimum Distributions, at which point you can still leave the money in the TSP, but you must begin making withdrawals from the accounts). The TSP will not charge you any additional fees to leave your funds in the account, even if you are no longer working for the military of civil service.
That said, since you will no longer be in the military, you could consider consolidating your military TSP with your civilian TSP. This will reduce the number of accounts you have to keep track of and will make it easier to see everything in one place. It’s also easier when you reach retirement age and will be making withdrawals from your TSP. This becomes even more important once you reach age 70 1/2 which is when the IRS requires retirement account holders to begin taking Required Minimum Distributions, or RMDs.
I hope this points you in the right direction. I wish you the best as you transition into your retirement.
Dennis Harris says
Can your TSP account be rolled over into more than one IRA account?
Ryan Guina says
Hello Dennis,
I don’t see why not, if you do a partial rollover, or if you are splitting Traditional TSP contributions into a Traditional IRA and Roth TSP into a Roth IRA.
But outside of splitting up Traditional and Roth accounts, there is no real downside from putting everything into one account. It’s actually easier to manage a single IRA vs. maintaining and managing multiple IRAs. One IRA requires fewer forms, less time managing asset allocation, and less management when it comes time to take Required Minimum Distributions.
But, you should be able to do it if you want to.
Best wishes.
Mary says
I worked for Fed. Gov for almost 5 years(4 1/2 years exact) I think I was getting 3% taken out of my check every pay period, I was in FERS. I left there 15 years ago. And I stopped contributing any money, I wanted to know, did it accumulate interest over the years? And if so how does it work, is it like $100 a year interest or less? It have been a long time so I wasn’t making that much money, and did they match it? Also can I take the money out? I don’t know how much I had in there when I left I would guess maybe $2,500. I don’t know how to calculate the interest. Or how much It would be every year. Also would It be a good idea to take it out by it may not be that much. I don’t know. Please help
Thank you
Ryan Guina says
Hello Mary, You will need to contact the Thrift Savings Plan customer service desk – 1-877-968-3778.
They can help you gain access to your account and determine the account balance. You can decide what to do from there. You can choose to leave the funds in the TSP, which will continue to grow for your retirement, you can roll them into another retirement account or qualified annuity, or you can choose to withdraw the funds. The latter option will incur taxes and possibly early withdrawal penalties if you are under age 59 1/2.
Generally, the best option, if you do not need the funds right away, is to leave the funds in the TSP or roll them into another retirement account such as an IRA or an employer-sponsored retirement plan such as a 401(k). Best wishes!
Chris Heath says
If I have TSP as active duty, then separate to a job with a 401K, can I roll those contributions back into the TSP? TSP is king, and I’d like to let it grow at its low expenses rate when I separate, if possible.
Ryan Guina says
Hello Chris, I agree, the TSP is a great retirement account. You can definitely keep it open after separating from active duty. You can also roll over account balances from other retirement accounts without taxes or penalties.
However, you generally can’t directly rollover contributions directly from your 401k straight to the TSP. Many 401k plans do not allow for in-service withdrawals or distributions, though some plans do. I recommend checking with your employer’s (or future employer’s) 401k plan rules to see if in-service distributions are allowed, and if so, what the limitations are. In some cases, the limits may only allow a certain number of in-service rollovers per year.
In any case, the answer to your question is maybe, but not always. Some plans may allow it, and if so, there would likely be limitations. And many plans simply will not allow these types of rollovers.
That said, you can always keep your TSP open without penalties or additional fees, and you can always rollover IRA account balances or 401k plan balances after you leave your employer.
I hope this is helpful. Best wishes during your transition, and thank you for your service!
Ellen Wycoff says
My husband retired 15 years ago and is now 71. He is wanting to withdrawl all of his TSP. I am against it, as it will all be taxed. I am still working @ 68.
Any advice?
Ryan Guina says
Hello Ellen, This is something the two of you will need to work through together. It may not be a bad idea to visit with a fee-only financial planner that can give you both advice on how to manage your investments going forward. This way you have an impartial third-party who can help the two of you review your options and come up with the best solution for your situation.
Again, I recommend a fee-only financial planner, and not someone who will try to upsell you on their services and expensive investments. All you want is a financial review and some advice, not someone who will try to manage your money and charge a lot of ongoing fees.
Best wishes to you and your family!
JO says
Flexible withdrawals begin September 15, 2019
You asked, and we listened. Significant changes to TSP withdrawal rules and procedures go into effect on September 15, 2019. You can learn more about these changes and how they might benefit you in several ways:
Sign up for TSP Webinars.
Read the updated Questions and Answers about Changes to TSP Withdrawal Options.
Engage with us on our social media channels.
EDWIN T DAWARA says
Changes on TSP will be made on September 2019 and better option to leave TSP when leaving the service
More options on how to handle your investment.
Handsome Guy says
Hi, Once I separate from service. How are thrift savings taxed if you elect monthly payments for 1500. On 300,000 invested
Ryan Guina says
Hello Handsome Guy, The TSP withdrawals are taxed as regular income if they are Traditional contributions (the contributions were made from your paycheck before taxes were paid).
There are no taxes paid if these were Roth TSP contributions (taxes were paid on contributions before they were made).
The Roth TSP has only been around for a few years, and most people participate in the Traditional TSP.
I hope this answers your question.
mark Golden says
I read your TSP article, It was very interesting. I am nearing retirement under FERS and this is my question.
I have a Roth/TSP and regular TSP/thrift funds. I signed up for the Roth option, as soon as it was availed. But there is no discussion on, do you have to take from both. (I think you said that we do). Also I have heard that if you leave your funds with the Thrift Savings Plan, they do NOT give you the non-taxable portion on the end of year tax form.
So is it better to keep it with the TSP, or move the Roth to a separate bank. And the non- Roth in a separate instruction. I am guessing non-thrift intuition would provide better tax statement, showing taxable and non-taxable income. Of course in putting the funds in separate banks may make it more difficult to figure the taxed and % to take out. Currently I like 5 year CD paying around 2.20 % more than the G fund. But I would have to put it in 3 different banks to keep the FDIC insurance.
Can you give us the pros and cons on moving the funds out of the Thrift Savings Plan? And when you have 2 investments Roth and non-Roth. How useful are the tax statement from the TSP Or keeping them in the TSP. (I belong to NARF and they have difficulty providing this information)
Thank you
Mark says
Can you roll your military TSP to the gov’t TSP once you retire/leave the military? If so, are there penalties?
Ryan Guina says
Hi Mark, Yes you can, and there are no penalties. However, if you have any tax-exempt contributions that were made while you were deployed, then you may wish to keep those funds in your military TSP. Otherwise you will lose the tax-exemption for those funds.
Stephen says
I am 53 and retired from air traffic. I rolled my tsp into a ira with ameriprise financial. With the new law HR 2146 going in effect next year will I be able to withdrawal without 10% penalty even though I am no longer in a government plan account? Seems like there should be a grandfather clause for individuals who took this route.
Ryan Guina says
Stephen, Thank you for contacting me. I don’t see any language that would grandfather funds that were formerly held in government retirement plans, but that have since been moved out (But I’m not a tax professional, and I only read the summary, not the entire bill). You can try contacting a tax professional for further guidance, but I’m not sure there is anything that can be done.
Monique says
I joined the Marines in 2003. I seperated in 2005, and forgot about my retirement. I called today and TSP doesn’t have a record of me. I signed up in bootcamp, how can I find out where my funds went?
Ryan Guina says
Monique, The TSP won’t get rid of your funds – the account will simply remain in place, just inactive. I’m surprised they can’t find a record of your account, because everything should be maintained by your Social Security Number. You may try contacting them again if you have had a name change since you were in the service.
If that doesn’t work, then try to get written proof that you participated in the TSP. This can come in the form of annual statements, or a copy of an old LES. Then you will want to contact the TSP and provide them with the account number and go from there. You should be able to get a copy of an old LES from your branch of service’s main personnel section, in your case. However, since it has been 10 years, they may have already moved records to the National Archives. That said, they should be able to direct you to the right place. I hope this works for you. Best of luck, and thanks for your service!
Lewis says
Ryan,
Coming to the end of my first term as an Airman. Thinking about separating the USAF when my enlistment is finished. Right now I’m tucking away 4% of my base pay into a Traditional TSP, and another 4% into the Roth TSP option. Both TSPs, but I’m confused about the difference between traditional and Roth. When I read about roths, I see the word IRA attached to it. Difference between Roth IRA and Roth TSP? Is it worth investing in both the Traditional and Roth, or should I stick to one?
Additional information: been putting money into Traditional TSP for couple years now, just recently started putting money into Roth (new option last year, if I’m not mistaken). Currently deployed.
Thank you for your time.
Doug says
Hi, my question is when I get out of the Marine Corps and I try to roll-over my TSP, can I roll it into a ROTH IRA or does it have to be a traditional? I currently have funds in both the traditional and the Roth since the roth is somewhat new. Thank you for your advice.
Leslie Knudsen says
Ryan, Thank you for your post. As an income/annuity specialist I would like to add to your commentary regarding annuities. While some annuities can be complicated so is a cell phone if you need to know every single thing that it does. Most people I speak with are concerned about the following: Is my money safe, is my income guaranteed, how can I get to my money if I need it, and how does it grow?The annuities that I offer my clients (both fixed and index annuities) offer guarantees and 100% safety from risk of loss of principal and no fees or small fees, usually lower than 1% depending on various options which you may include. Pretty tough to find anything guaranteed these days. Index annuities can guarantee an income for life without giving up control of your principal. They are ideal for someone who only wants to look at a statement once a year and never be concerned about losing money in the market. They can increase the value of your income by 7 or 8% each year before you begin taking distributions or income payments, and double a long term care payout should the need arise. As long as you do not annuitize, which is an option that very few people ever use, at least not in my 37 years of offering them, you still have total control over your plan. The disadvantages are that there is a holding period from five years up to 10 or more depending on your state and guidelines. However, you do have access to your money, normally 10% per year without any charges. If you surrender before the end of the term then there are charges, but the bank charges interest penalties if you quit your CD early . Likewise, if the market is down and you have to sell your stock at a lower price than originally purchased then that too is a type of fee. Paying a broker to manage your money year after year costs at least 1/2 to 1% per year as well. Rates on fixed only annuities right now are about 3.25% which is certainly better than the bank and without the volatility of the market. Annuities have been around since the Roman times and those like Babe Ruth who had them during the Depression were grateful that their money was saved. It is true that they are not for everyone but they can be an excellent option for a TSP rollover. One last thing: they have Stretch beneficiary options to preserve the IRA for multiple generations which most other options you mention do not.
Jose Lopez says
Hello, I’m retiring very soon. My question is: If I choose to leave my Money in the TSP account upon retirement, if this money will continue to growth/ gain interest? Thank you in advance for any help!
Ryan Guina says
Jose, Yes, your TSP will continue to grow and accumulate interest. And the TSP actually has lower associated costs than just about any other type of mutual fund or investment. The TSP is a great place to keep your retirement investments. You can even transfer funds into the TSP from a 401k or an IRA. So it’s a great building block for your retirement portfolio.
Mike says
Thanks for the reply and your service to our country. I work for the navy now and am also retired Navy. Thanks for helping me and all other Military and Civilian employees with this helpful and needed information.
Mike
Mike says
Great article! I’m retiring from the FED the end of the year. Can I take a monthly payment from TSP without doing an annuity?
Thank You, Mike
Ryan Guina says
Thanks, Mike! Yes, you can set up automated monthly withdrawals if you want to do it that way. The TSP Monthly Payment Calculator is a great tool to help you understand what your savings will support. You can find it here.
You can set up monthly withdrawals with Form TSP-70. You should speak to a TSP rep if you need assistance filling it out.
chris says
Hi Ryan,
Great article, thank you for posting it.
My question is this: I recently came off active duty Army and joined the National Guard. Can I transfer my TSP that I had while on active duty to an IRA or will I have to wait until I have completely separated from the military?
Thank you!
Ryan Guina says
Chris, You need to be completely separated from the military before you can roll your TSP account into an IRA. For example, you could transfer the IRA after you separate from active duty if you have a break in service between joining the Guard. If you go straight into the Guard, you will not be able to roll it into an IRA.
Also, if you have tax free contributions that you made in a deployment zone, then you need to pay special attention to how you do the rollover. Some IRAs are not able to handle tax-exempt contributions. If this is the case, then your normal contributions would go into the IRA and your tax exempt contributions would be sent to you in a check. You would be able to contribute the tax exempt contributions to a Roth IRA, which is a better long-term option for most people.
I hope this helps. Best of luck, and thanks for your service!
Ed says
30 years of federal work under FERS, debt free and retiring in 2014. How can i receive and income from interest gain on a monthly basis? So the principal will remain the same. Thanks.
Tom Reifsnyder says
Hey Ryan,
What kind of flexibility is offered with the introduction of Roth TSP? Could someone roll just their ROTH TSP to ROTH IRA and keep their Traditional TSP alone? Can they roll ROTH TSP to ROTH IRA and Traditional TSP to Traditional IRA?
The ROTH TSP was introduced at the midpoint of my contract, so my funds in Roth and Traditional should be somewhat similar at separation. I’m a big fan of ROTH anything and was thinking of rolling all of my TSP funds into a ROTH IRA. Any thoughts on this, and in general how the Roth TSP changes your separation advice?
E says
Dear Ryan, I want to thank you for this post. I am 33 planing on separating from the Active duty in about 2 years. I’ll have completed 10 years of service by then. I’ve been contributing since I joined and increased my contribution to 22 % in the past 3 years and i also have about 26 months of combat contributions. I always thought of it as a forgotten savings account so I have the G fund which I don’t touch and just recently got a password to access it. Most people keep on telling me that I should pay taxes now so i don’t when i cash out by using a Roth IRA. I am extremely ignorant in the whole investment subject. Should I do that if i am able to? Must I do it before I separate? How do i find a Roth IRA?
Looking at my emergency fund and learning about the penalties of early withdrawing from the TSP I am wondering should I just decrease my contribution to the minimum and save the money on my bank account (i.e a 2 year USAA CD) to support my post mill and post GI Bill life in case I don’t find a job right away? Also getting ready to PCS overseas (non combat) where I’ll be able to save at the minimum 48 G. How should I invest this saving. I am debt free, no kids and single. Thank you.
Ryan Guina says
E, I’m glad you found this article helpful. You have a lot of great questions. I will try to answer a few of them.
A Roth IRA is a good way to invest because it offers better long term tax benefits for many situations. Here are some differences between a Roth and Traditional IRA. Here are some good places to open a Roth IRA.
As for investing, you will most likely do much better in the long run if you invest in equities including some stocks. A good way to do that with the TSP is to use a LifeCycle Fund, which is automatically allocated based on your proposed retirement date. This will help you earn better returns in the long run, while maintaining an acceptable level of risk. Here are some tips for beginning investors.
An emergency fund is a great idea since you know you will be separating in a few years. It’s a good idea to start saving some extra money now.You have a good advantage since you don’t have nay debt. I recommend saving at least 6 months of living expenses, but you might want to have a little more if you know you will be going to school and won’t be able to work much due to course load. You might also want to look into taking classes while on active duty if you are planning on going to school when you get out. Tuition assistance will pay for your classes now, and getting some courses out of the way will save you a lot of time and money in the long run. Here are some tips for taking classes while in the military.
I hope these tips are helpful. Best of luck, and thanks for your service.
Dean says
As a retiree can I still contribute to the TSP? I started an IRA when I got out and never thought to ask that question.
Cheryl says
Dean — No, you are not able to make contributions to your TSP after you separate (retire) from the service. You can leave it invested in the TSP where your “earnings” will be automatically reinvested for you; you can roll it over into your “new” employer’s program; you can roll it over into an IRA; or you can withdraw it. You cannot continue to make contributions to it if you are no longer in service.
Jason says
Ryan
What happens to all the dividends from the stocks? I have never received one from TSP but I do from my IRA. Where do they disappear to?
Jason
Ryan Guina says
Jason, The dividends don’t disappear. When your funds are in the TSP, they are automatically reinvested for you. If you transfer your funds out of the TSP, then everything is cashed out and you roll the funds into a new investment. Because there are no old funds on the TSP, there is no longer anything that can earn a dividend.
Sandi says
Great advice! I am a FERS employee and a Reservist. I have a Uniformed Service TSP account and would like to use some of the money to buy-in to my FERS Annuity. Can I do this without having to pay taxes on the money?
Ryan Guina says
Sandi, Thanks for sending in this question. To be honest, I’m not sure what the answer is. I recommend speaking with your HR representative in the civil service. They should be able to answer this question.
RAFAEL says
hELLO, i WAS WONDERING. if I leave my federal job and therefore the military and want to withdraw all my money. Are we talking about everything that is on the tsp including what they matched or juast what I contributed? Please answer that for me I am a little confused!
Ryan Guina says
Rafael, here are the TSP vesting requirements, according to Wikipedia:
Vesting Requirements: All employees or service members are fully vested in their contributions and any earnings thereon from the first day of employment or service. FERS employees are also fully vested in agency matching contributions and any earnings thereon from the first day of employment. However, most FERS employees must complete three years of Federal civilian service (some positions require only two years) to be fully vested in agency automatic contributions and any earnings thereon.
Based on that information, you should be able to withdraw all matching contributions. Keep in mind, however, that if you are under the minimum age limit for withdrawals, that you may be required to pay early withdrawal penalties and taxes on your withdrawal if you don’t roll over your TSP into an IRA, another employer sponsored retirement plan such as a 401k, or a different qualified plan. The article covers more of these options in better detail.
Luke says
Is it possible to rollover your TSP account into a Traditional IRA while still on Active Duty? I fully understand the benefits of the TSP (low fees mostly) but I no longer wish use their limited investment options. Thanks.
Ryan Guina says
Luke, unfortunately it isn’t possible to roll over your TSP while you are still on Active Duty. You can only roll over the funds once you leave the service.
Bill says
I think some may be confused or it is just me? The money contributed to TSP while in a combat zone is Tax Exempt! The profits made from those funds are not exempt only deferred. Basically when you are eligible to withdraw from TSP the only amount that is exempt are the funds you contributed in a combat zone. Each are proccessed through TSP on seprate tax forms as well. Please correct me if I am wrong…
USMC Ret…
Ryan Guina says
Bill, this is my understanding as well.
Al says
@ Bill – April 2012 Highlights: “The earnings on Roth contributions will also be tax-free.”
Tax free combat pay should be invested in a Roth IRA and or the Roth TSP.
Jeremy says
Ryan,
Great article. When I separated from active duty Air Force in 2007 and entered federal civil service (for the Air Force), I opened a FERS TSP account and transfered my AD TSP account into it. I’m glad I had that option when I took off the uniform and put on a suit.
Darrell says
There is some talk about the FEDS taking over 401 accounts and allowing limited access to account holders in an effort to combat budget shortfalls. Should I be concerned about this and how can I protect myself from Uncle Sam? In Rolling my TSP over to an IRA where I have more control would I be able to gain access to the funds more quickly if it looked like I needed to make a withdrawal to escape GOV control?
Ryan Guina says
Darrell, the government has no access to your TSP account, so at this point, it shouldn’t be a concern. However, if you want more control over your investments, then sure, rolling your TSP into an IRA will give you that control. You will have even more control over your distributions if you do a Roth IRA conversion as well, because there is no minimum distribution requirement as there is with a Traditional IRA.
Tom says
You also forgot an important aspect to consider, which is that if you transfer out all of your money, then you lose your TSP benefit forever…
Let’s say that after your govt service you get a job and start a 401k with a civilian employer. When you eventually leave that employer, if you still have money in your TSP, then you can roll your civilian 401k into your TSP account. The advantage of this lies in the fees, as the TSP fees are rock-bottom, the lowest in the industry.
Tom says
You forgot one of the best options… Rolling it over to a Roth IRA. Almost the exact same thing as rolling it over to an IRA, except that you pay the taxes on the non-taxable contributions. Because the TSP keeps a record of what money is tax-free vs. tax-deferred, if you have a lot of tax-free contributions, then you won’t have to pay taxes on that portion when you transfer it.
In order to do this, you need to be SURE that you have the money to pay the taxes. However, once you do, that money is forever tax-free. It grows tax-free and is withdrawn tax-free. It’s like being able to make a mega-contribution to a Roth IRA. There’s a reason why the Govt limits how much you can contribute to a Roth IRA, and it’s because it’s an incredible deal. Rolling a 401k (TSP) to a Roth IRA does not count as a contribution and therefore, does not get counted against the contribution limit. Also, the best time to roll it over is during a year when you have little income and/or when the market is down (less money in the account = less taxes; less annual income = less taxes.)
Brian says
I looked into doing this and I believe the form is TSP-60 (TSP-U-60). Here’s a link to the page on the TSP website: https://www.tsp.gov/planparticipation/transfers/methods.shtml
Daniel says
Good advice. I will definately leave it alone to take advantage of the tax free money I invested while I was deployed. I’m thinking of moving my allocations around a little to see if I can get it to grow a bit more, any suggestions here?
Ryan Guina says
Daniel, I think it’s a great idea to keep your funds in the TSP if you can gain some additional tax advantages. I don’t have any specific advice regarding which funds to choose, because everyone has a unique situation. I recommend treating your TSP account as part of your overall investment account and not to try and diversify everything in your TSP, but use your TSP as part of your overall diversification.
Best of luck and thanks for your service!
Mike says
I recently separated from the Military, I have not yet taken any actions with my TSP. I understand I can roll it over, but is there a time frame in which I need to roll it over to a 401k? If I decide to keep it in TSP I know I wont be able to contribute, will the money still grow if I was to leave it? And is it possible to change my funds for instance from life-cycle to whichever. I don’t really know too much about TSP because i did it when i first joined the military so i have no touched it since basic training. I have no access to my TSP either so how do i withdraw it if i ever need to?
Ryan says
Mike, there is no set time frame regarding when you can roll over your TSP account. You can either roll it into your 401k at your new job, or you can roll it into a Traditional IRA. Alternatively, you can leave your investments in your TSP account and they will continue to work for you. You may still change your asset allocation, however, as you mentioned, you will not be able to add additional contributions to your Thrift Savings Plan account.
Finally, if you need access to your TSP account, visit the TSP website and click on the contact link at the bottom of the page. YOu will be able to get your login information online, or by calling them on the phone.
Best of luck, and thanks for your service!
Dan Reising says
You can still contribute to the TSP after separation. You can’t contribute “employee” contributions, however you can STIL contribute to your TSP from IRA’s and other eligible employer plans.
form TSP-50 (TSP-U-50)investment allocation
Note: TSP-50 is for civilians, and TSP-U-50 is for Uniformed service members.
Ryan says
Dan, My understanding is that you can do a rollover, which is transferring the assets from an IRA or a different employer sponsored retirement plan. But you can no longer make contributions from other sources.
j lynn says
Thank you SO MUCH for writing this article! My husband is ETSing in 4 months and considering National Guard; we didn’t know what our options were, and reading through the TSP site left me utterly confused. We’re leaving the money in! THANK YOU!
shiela says
I have a question: my husband is separating from the military but is planning to join the Natioanl guard. Can he still make TSP contributions even he’s no longer in the active service? thank you!
Ryan says
Shiela: From what I understand, yes, he will continue to be able to contribute to the Thrift Savings Plan when he joins the National Guard. Best of luck!
Dreamer says
It is absolutely true that the TSP has very limited choices. But, they are solid choices, excellent for a good asset allocation plan, and the fees are unbelievably low. I agree: Even if it’s a little inconvenient to keep more than one account, keep it in the TSP.
For a little advice on the TSP, I defer to the outstanding Paul Merriman, an investment advisor that gives excellent, free, advice on proper asset allocation and index fund investing on his website.
Rafael B says
Good evening. I have the TSP investments in the C fund at 55% and S fund at 40% and I fund at 5%. Totaling 100% Should I leave it that way. This week I lost almost $900.00. Where should I move it to. Thank you.
Jarhead says
I think with the way things are going today any service member that has a deployed multiple times and has contributed to the TSP would be wise to keep their money there when they separate. True you won’t be able to keep contributing but tax free money growing tax free will out weigh that (just make sure you invest somewhere else).
With contribution limits higher on the TS than a Roth IRA you might be well off investing as much as you can while deployed to take advantage of the tax free growing of non-taxed monies.