Can You Move Funds From a TSP to an IRA?

Can you move funds from a TSP to an IRA

Transferring funds between TSP and IRA accounts may be feasible; however, it’s essential that you carefully consider all potential advantages and drawbacks before making this decision. A financial planner can assist in helping you make an informed decision that meets your needs.

IRAs typically offer more investment options and lower fees than TSPs, though there may be advantages that make keeping money there worthwhile.


As part of your financial plan, it is crucial that you understand the tax ramifications associated with such transfers. The IRS has issued rollover guidelines which outline which retirement accounts money may be moved between.

An often-made error is to mistake “rollover” for “transfer.” TSP representatives tend to use these terms interchangeably when discussing transfer; however, there’s one major distinction: TSP will only process your transfer if the necessary form is submitted and signed by both parties involved.

Transferring a TSP account to an IRA can be complex, so it’s vital that it goes smoothly from start to finish. Also be sure to compare fees and expenses between TSP and your new IRA custodian; if your new account offers lower fees you could end up saving money over time. Plus investing through an IRA gives you more investment choices such as REITs or alternative investments not offered through TSP alone.

Investing options

If you decide to transfer funds from a TSP into an IRA, there are various options available to you. One popular choice is the Roth IRA which can provide significant tax benefits while offering low-cost investments.

Direct rollover is another viable solution, enabling the TSP to transfer your distribution directly into your new plan or IRA without withholding taxes at source. However, direct and indirect rollovers must be deposited within 60 days or the distribution will become taxable.

Last, another option is professional fund management by an investment advisor; this may come at an increased cost – usually around 1% of assets managed – so this may not be suitable for everyone. However, if this route appeals to you make sure your advisor is either registered as an RFP (Registered Financial Planner) or Certified Financial PlannerTM practitioner (CFPTM).


As part of your transition, when moving your TSP funds to an IRA it’s essential that you understand its tax implications; to do this you should consult a financial professional as it can be complex. Furthermore, choose an institution which accepts TSP distribution checks such as USAA, NFCU or PenFed as these offer this service.

Your TSP account administrator will directly transfer funds into an appropriate retirement account such as an IRA or employer plan in your name. In direct rollovers, however, your TSP administrator may instead assist in depositing them there for you.

An indirect rollover requires having 20% of your funds withheld from you by the TSP office and sent over to the IRS, where you must redeposit within 60 days or risk significant fines from them being redistributed back into the account – this can be particularly burdensome for those under age 5912. If unsure which option best fits you, speak to a financial professional before making any definitive decisions.


Rolling over TSP funds to an IRA incurs various fees, typically in the form of commissions from investment managers managing your IRA investments. These costs could exceed 1% of total assets under management but may be worthwhile for some who wish to entrust professional money management with their IRA investments.

Keep in mind, however, that TSP accounts do not incur fees; when opening an IRA account in addition to this you need to consider the costs associated with managing them – these could be quite significant.

After reaching retirement age, one other significant change should be considered: you will no longer be eligible to make penalty-free withdrawals from your TSP; rather, a minimum withdrawal must be taken every year. This represents a substantial shift in your finances and should be carefully taken into account.

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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