Can You Move Funds From a TSP to an IRA?

Before making your decision to move funds from a TSP to an IRA, carefully consider fees. TSP funds tend to have some of the lowest fees on the market but switching plans or accounts may incur additional expenses.

Utilize an experienced advisor to ensure you’re receiving top advice on investments. SmartVestor can connect you with local advisors who can explain TSP options and craft an investment strategy tailored specifically for you.

Direct rollovers

Thrift Savings Plan (TSP) is an excellent way for federal employees to save for retirement. Offering diverse investment options with low fees and tax-deferred growth, TSP provides federal employees with a great way to build retirement funds without leaving government employment. But should they decide to relocate outside it there are certain things they should consider prior to moving their investments out of TSP and into another account.

1. Fees and Expenses

Although TSP investments are relatively cost-effective, there will still be expenses related to any investment decision you make – from mutual fund annual operating expenses, account maintenance fees and brokerage commissions – regardless of which provider they come from. While they might offer lower costs overall, lower fees don’t always equal better returns.

2. Indirect Rollovers

When rolling over from a TSP to an IRA, 20% will be withheld for federal taxes and redeposited back into your IRA within 60 days in order to postpone taxation and the 10% early withdrawal penalty.

Indirect rollovers may be worthwhile for those who can manage a distribution from their TSP and ensure it lands completely back into their IRA, but for others who do not, this option may not be worth their while.

3. Professional Money Management

One advantage of moving TSP funds into an IRA is accessing professional money management services; however, this cost may quickly add up; investment advisors typically charge upwards of 1% annually of your assets under management as fees.

4. Greater Portability

With direct rollovers, TSP funds can be moved directly from their account into either a traditional or Roth IRA. Unfortunately, an indirect rollover from one account into another and then back again cannot be completed; this can pose problems when switching jobs or retiring as it forces you to manage withdrawals on your own.

5. Conflict of Interest

Financial professionals that suggest an IRA rollover could potentially gain commissions or other forms of compensation for their advice; on the other hand, leaving assets in TSP or rolling them over into an employer sponsored plan may result in reduced or no compensation from financial experts.

At the end of the day, only you can decide what’s best for your situation. If you’re satisfied with your TSP investment options and fees, staying put may be wise; but if you prefer more freedom over fees with an IRA option may be ideal. SmartAsset’s free tool connects you with up to three vetted financial advisors serving your area who offer free initial consultation calls; use them now and start searching!

Raymond Banks Administrator
Raymond Banks is a published author in the commodity world. He has written extensively about gold and silver investments, and his work has been featured in some of the most respected financial journals in the industry. Raymond\\\'s expertise in the commodities market is highly sought-after, and he regularly delivers presentations on behalf of various investment firms. He is also a regular guest on financial news programmes, where he offers his expert insights into the latest commodity trends.

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