Federal Benefits

TSP Basics

TSP Investments

TSP Rollovers

FERS & CSRS

Federal Life Insurance

Federal Long-Term Care Insurance

TSP In-Service Withdrawals

Questions about TSP Rollovers?

Should I rollover my TSP? Answer: Your individual circumstances determine whether it’s in your best interest to rollover a TSP account to an IRA

TSP Rollovers

What is the difference between an IRA Rollover and Transfer?

IRA Transfer – When assets move directly from one IRA custodian to another IRA custodian. This transaction is not reported to the IRS. You can transfer your account as many times as you want in any time frame you want. There are no limits or restrictions on transfers between an IRA and a financial institution.

Important note: When transferring IRAs, the registration must be the same. For example, if you have a traditional IRA, it must transfer to another traditional IRA. You cannot transfer a traditional IRA to a Roth IRA. If you want to transfer money from your pre-tax traditional IRA to a Roth IRA, you must initiate a Roth IRA conversion which requires filling out paperwork and paying tax on the full amount of the conversion at your ordinary income tax rate.

Technically speaking, transferring money from your TSP to an IRA is an IRA rollover.

 

IRA Rollover – There are two types of rollovers:

  • Direct Rollover or Trustee-to-Trustee Transfer – When assets transfer directly from one financial institution to another without you ever touching the money. That is by far the best way to transfer the funds from your TSP to an IRA or other employer-sponsored plan. The direct transfer eliminates many rollover problems.
  • Indirect Rollover – When you personally take possession of the assets before they get deposited in your IRA Rollover account. For example, you receive a check from your company retirement plan and deposit those funds into a personal bank account. You then write a check from that account and mail it to your new IRA provider. You must deposit your rollover check into your IRA within 60 days to avoid the IRS from taxing these funds as ordinary income and a possible 10% penalty.

 

Beware of the rollover rules

The purpose of a rollover is transfer assets in your TSP to another company plan or an IRA WITHOUT paying taxes. Rollovers are only tax-free if you adhere to the following two main rollover rules:

  • The 60-day rule – The general rule is that when you take a distribution from an IRA (or other tax-deferred retirement account) payable to yourself, it must be deposited back to an IRA (or other tax-deferred retirement account) within 60 days of the receipt of the funds. The 60-day period starts on the day the client receives the funds. If the funds are not rolled over within 60 days, the consequences are serious. The distribution of pre-tax amounts is taxable, plus a potential 10% early distribution penalty and the funds are no longer part of a retirement account. Even a late Roth IRA rollover is affected. While the distribution may not be taxable, the tax-free Roth shelter can be lost.
  • Once-per-year rollover rule – The IRS only allows one rollover in a 12-month period. This applies to IRA-to-IRA and/or Roth-to- Roth rollovers, not to Plan to Plan, IRA to Plan or IRA to Roth IRA (a Roth conversion).

 

Reasons to roll over your TSP 

Reasons to leave money in your TSP 

 

How to rollover your TSP

Before you request a withdrawal from your TSP savings, be sure to read the booklet Withdrawing from Your Account for Separated and Beneficiary Participants.

To request a withdrawal, log into My Account and click on the “Withdrawals and Changes to Installment Payments” link on the menu. From there you’ll have access to an online tool with which to start your withdrawal.

Depending on your circumstances and the type of withdrawal you request, you may be able to complete your transaction entirely online. If your signature or your spouse’s signature is required, you’re purchasing an annuity, or you’re transferring any part of your withdrawal, you’ll see a prompt to print a summary of your request with requirements for notarized signatures or information from your financial institution. You may then submit the completed summary by upload through My Account or by mailing or faxing it to us according to the form instructions.

The TSP cannot process your withdrawal request unless your agency or service notifies them that you’ve separated from service and provides the date of your separation. It usually takes up to 30 days after the actual date of your separation for us to receive this information.

 

Transferring or rolling over your TSP

After you leave federal service, you may be able to transfer or roll over all or part of your partial or full withdrawal amount to an IRA or eligible employer plan.

The tax rules regarding transfers and rollovers can be complicated. You should consult a tax advisor to ensure that you understand the tax consequences of such a transaction. For detailed information about transferring or rolling over your withdrawal, read the tax notice Important Tax Information About Payments From Your TSP Account.

 

Depositing your withdrawal electronically

Any single payment or monthly payment that is not transferred directly to an IRA or eligible employer plan can be deposited electronically in your savings or checking account. Simply provide the necessary information in your withdrawal request.

 

Receiving your money

Allow several weeks from the time you submit your completed withdrawal request and the time that payment is sent. Your withdrawal could take longer if your agency or service delays reporting your separation from federal service, if you have an outstanding TSP loan, or if you submit forms that are not completed properly. The TSP will notify you in writing when your payment has been sent. You can go to My Account: Withdrawals or call the ThriftLine to find out the status of your request.

Inbound Transfers and Rollovers

Outbound Transfers and Rollovers

Outbound Transfers Choice of Tax Regimes

What should I consider?

• Investment Options
• Fees and Expenses
• Services
• Early Withdrawal Penalty
• Required Minimum Distributions

What’s the bottom line?

• Different types of accounts can differ in
unexpected ways
• The destination account determines what rules, costs, and restrictions will apply to your money
• Take a careful, holistic look at all your options before you leap

Investment Options

• IRAs
– Might offer more investment options than a plan
• Plans (including TSP)
– May be able to offer lower cost (“institutional”) share classes
– Investment menus are selected and monitored by plan fiduciaries
• TSP
– Offers 5 low-cost, passively managed funds