The Thrift Savings Program, or TSP, is a great way to save pretax dollars for retirement while working for the federal government. As is the case with other retirement plans, the choices in the TSP are limited to a few basic funds. When you leave the government, or reach 50 ½, you’re allowed to roll your TSP over to an IRA, which has nearly unlimited investment options. Rolling your TSP over to an IRA can help diversify your portfolio among much better choices.
Check your employment status. In-service withdrawals from the TSP aren’t allowed except for financial hardship, or for persons over age 59 ½. If the government has you listed as currently employed, it’s better to find that out early than to waste time completing unusable rollover paperwork. Confirm that you are officially terminated from service with your former department, if you aren’t sure.
Open an IRA. If you enjoy researching investment choices, and making financial decisions alone, focus on IRAs at discount or online brokerages to save money on trading fees. If you’d rather work with a licensed professional, who can help point you toward suitable investments and quarterback your IRA decisions, look toward a full-service brokerage firm. Before hiring an adviser or broker, check his record and employment history at the Financial Industry Regulatory Authority’s BrokerCheck website.
Explore all of your options with the TSP before finalizing your transfer to an IRA. Rather than move your money to an IRA, you may leave it in the TSP, take a partial withdrawal and leave the remainder, or take payments as a lifetime annuity. The lifetime annuity option is an irrevocable decision, allowing you to receive periodic payments based on your life expectancy instead of cashing out the account. If you'd like more details on these other options, read "Withdrawing Your TSP Account After Leaving Federal Service," available at TSP.gov.
Fill out Page 1 of Form TSP-70, "Request For Full Withdrawal" (or Form TSP-U-70 if you were uniformed services), both available at TSP.gov. FERS participants who are married are required to obtain a notarized signature from their spouse on Part III of the form. In section IV, line 23, choose single payment, and write “100 percent” on line 24 to show that you wish for 100 percent of your withdrawal to transfer directly to an IRA. Send this completed form to Thrift Savings Plan, P.O. Box 385021, Birmingham, AL 35238.
Fill out section V on page 2 of Form TSP-70 or TSP-U-70 before sending to your new IRA trustee. Ask them to fill in the details on your new IRA in section VI. Once they return this to you, verify the information matches your records and sign the form in section VIII, Certification. Send this form to Thrift Savings Plan, P.O. Box 385021, Birmingham, AL 35238.
- What are the Qualifications for a Traditional IRA?
- Traditional IRA Payouts
- The Max Income for a Traditional IRA
- How to Make My Traditional IRA Into a Roth IRA
- Can I Contribute to Traditional IRA & Roll Over to Roth Immediately?
- Tax on Early Distributions of a Traditional IRA
- How to Transfer a Simple IRA to a Traditional IRA
- How Do I Convert Money From a Traditional IRA to an HSA?
- How to Open a Traditional IRA With a Cash Deposit
- Can I Invest in TSPs & Traditional IRAs?