When I separated from the USAF in 2006, I was faced with 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 so you can make an informed decision if ever the need arises.
Table of Contents
- Options for your TSP when you leave the service
- Leave TSP account assets in your account
- Roll your TSP assets into an IRA
- Roll your TSP assets into new employer’s 401(k) plan
- Withdraw your TSP assets in a lump sum
- Transfer the assets to a qualified annuity
- Best options for your Thrift Savings Plan account
Options for your TSP when you leave the service
The TSP plan is similar to a civilian 401(k) plan. Members contribute pre-tax money into their Thrift Savings Plan account and only pay taxes when they withdraw the money. When your employment ends with the military or civil service and you can no longer contribute to your TSP account, you are faced with several decisions regarding your TSP account. Your options are similar to those with a civilian 401(k) plan.
There are 5 options for your TSP account
- Leave the assets in your TSP account.
- Roll your TSP account assets into an IRA
- Roll your TSP account into your new employer’s 401(k) plan.
- Withdraw your TSP account assets in a lump sum.
- Transfer your TSP account assets to a qualified annuity.
Let’s take a closer look at your options:
Leave TSP account 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.
Advantages: The TSP is a great place to invest for retirement. The TSP is 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 maintain 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 advantages of investing in the TSP.
Disadvantages: The TSP has limited investment options. There are only 5 main funds to choose from and a few target funds. You will also not be able 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 disadvantages of investing in the TSP.
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 don’t want to deal with extra paper work or you want more investment options. Otherwise, consider rolling your TSP account assets into your new 401(k) plan if you have one, or one of the other following options.
Roll your TSP assets into an IRA
Rolling your Thrift Savings Plan assets into a Traditional IRA will help you avoid the 10% early withdrawal penalty. You will also control your IRA and have unlimited investment options. If you enjoy hands on investments, then rolling your TSP into an IRA may be for you.
Advantages: The biggest advantages of rolling over your TSP into an IRA are avoiding the 10% early withdrawal penalty, maintaining certain tax advantages, and controlling your investment options which will no longer limited to the investment options in the Thrift Savings Plan or your new employer’s 401(k) plan. Total control allows you to limit your expenses and maintain full control of your investment. Also note that rolling your TSP assets into an IRA does not mean it is final – you may be able to roll it into your new 401(k) plan later.
Disadvantages: You will not be able to take loans from your TSP, which you would have been able to do if you rolled it into your new employer’s 401(k) plan. It is also easier to make withdrawals from 401(k) plans under certain circumstances.
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.
Roll your TSP assets into new employer’s 401(k) plan
This is a good option if your new employer’s 401(k) plan has strong investment options and low expense ratios. Another thing to consider is reducing the number of investment accounts you have to keep track of, maintain, and balance.
Advantages: Your retirement assets maintain their tax advantages and there are no penalties or fees to transfer or your money. You can borrow against your 401(k) if you want, and you will minimize the number of retirement accounts you have.
Disadvantages: You are limited to your new plan’s investment options. This is important if your new 401(k) plan has limited investment options or higher than average expense ratios, which cause lower returns. Some employers have a minimum waiting period before you can sign up for their 401(k) plan, so you may have to wait before you can rollover your TSP assets.
Verdict: Consider this option if your new plan has strong investment options and/or you want to reduce the number of retirement accounts you need to maintain.
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.
Possible Advantages: Your assets (minus income taxes and early withdrawal penalties) will be available for immediate use. This can help during periods of unemployment after separating form the military or civil service.
Disadvantages: The huge tax payment and the 10% early withdrawal penalty (if you are under age 59½) reduces the amount you receive by almost a third. In addition you also all lose tax deferral benefits, potential future earnings, and lock in any market losses. Most importantly, you reduce the amount of money you have for your retirement.
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 which allows you to roll the money into an IRA within 60 days. However, you will be required to come up with the 20% difference to reinvest the entire amount and avoid paying income taxes. You will 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 you 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.
Transfer the assets to a qualified annuity
The final option is to transfer your TSP assets into a qualified deferred annuity. This is an an option few people are aware of, and one not many people use. In many cases it is not the best option. As with rolling over TSP assets into an IRA or 401(k), the assets will remain tax deferred and you will not pay early withdrawal penalties.
Possible Advantages: An annuity is similar to a “personal” pension and creates an income stream for life. Retirement plans such as the TSP, IRAs, and 401(k)s are limited to the amount of money you are able to invest and you can outlive them. Your heirs may be able to inherit a portion of your annuity if you pass away during the accumulation phase.
Possible Disadvantages: Rolling your TSP into an annuity is final. Once it has been done, it cannot be reversed. Many annuities come with much higher fees than 401(k) plans and IRAs, and many states charge high tax premiums on annuity plans. In addition, you may pass away before your annuity pays out the amount of money you would have had in your 401(k) or IRA, leaving nothing for your heirs.
Verdict: Annuities are not necessarily bad, but there 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.
Best options for your Thrift Savings Plan account
In most cases, the best option will be to transfer your TSP assets to your new 401(k) plan, an IRA, or leave your assets in the TSP account. Your should base your decision on your situation.
What did I do with my TSP account?
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 will remain tax free, even when you withdraw it during retirement. I deployed 5 times while I was 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: Should you consolidate 401(k) accounts? This article looks at the same situation rolling over a TSP account.
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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.