What are TSP rollovers – What is a TSP rollover? 1-800-566-1002 What are the best types of TSP rollovers and learn how you can avoid the most common mistakes that individuals have made when looking to rollover their TSP account into an IRA account.

A TSP is a retirement savings plan for federal employees and members of the military. It allows you to save money for retirement while taking advantage of tax benefits. However, when you leave federal service or retire, you may want to roll over your TSP funds into an IRA to have more investment options and control over your retirement savings.
Full control of investments: Rolling TSP funds into an IRA gives you more control over your investments. With the TSP, your investment options are limited to the funds offered by the plan. On the other hand, an IRA allows you to choose from a wider range of investments, including individual stocks, bonds, and mutual funds.

More investment options: As mentioned, an IRA offers a wider range of investment options than the TSP. This can be beneficial if you want to diversify your portfolio or invest in assets not available through the TSP.

Professional money management: If you don’t want to manage your investments yourself, rolling TSP funds into an IRA allows you to work with a professional investment advisor. They can help you develop a personalized investment strategy based on your financial goals and risk tolerance.

Portability: An IRA can be more portable than the TSP. If you leave your job or retire, you can roll over your TSP funds into an IRA and take them with you. This can be beneficial if you want to consolidate your retirement savings in one place.

Tax benefits: Depending on the type of IRA you choose, you may be eligible for tax benefits that are not available with the TSP. For example, a Roth IRA allows for tax-free withdrawals in retirement.
While rolling TSP funds into an IRA has its advantages, there are also some potential disadvantages to consider.

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The Thrift Savings Plan (TSP) is a retirement savings plan similar to a 401(k) offered to federal employees, including military personnel. It is a defined contribution plan, meaning the employer and employee contribute a certain amount of money to the account, and the earnings on that money are tax-deferred until withdrawal. However, when leaving federal service, many employees consider transferring their funds from TSP to another employer’s plan or an Individual retirement account (IRA) in a process called a TSP rollover.

A TSP rollover is a movement of funds from a TSP account to another qualified retirement plan without incurring taxes or penalties. The rollover can occur when an employee retires, resigns, or separates from federal service. When an employee decides to rollover their TSP account, they have three options.

Firstly, they can complete a direct rollover from TSP to another qualified account holding retirement funds. In a direct rollover, the funds are transferred from TSP to the new account custodian without the employee ever receiving the funds. This technique minimizes taxes and penalties since the transfer is made to a similar account. The funds are subjected to similar regulations as before, and the investment continues with no interruption.

The second option is an indirect rollover. An indirect rollover is where the employee receives a check from the TSP account and has 60 days to deposit it into another qualified account such as an IRA. During that time limit, the funds are at risk with restrictions, namely one indirect rollover is allowed once every 12 months. In a case where the deadline is missed, the employee is subject to taxes and penalties.

Lastly, the employee can decide to cash out their TSP account in a lump sum, pay taxes, and invest the money as they prefer. This option might not be the best for many employees since they will face taxes and penalties on the funds. Additionally, the investment might result in lower returns than before.

In conclusion, TSP rollover is a crucial decision that requires an understanding of the various options available. It’s always advisable to discuss this issue with a financial planner to make an informed decision that best suits individual goals and circumstances.