3 Easy Steps to Roll Over Your TSP Into an IRA

Over 60 million Americans today have 401(k) accounts, making them one of the most popular types of retirement accounts. Federal employees don’t have 401(k) accounts, but instead have the Thrift Savings Plan (TSP), a defined contribution program that’s similar in many ways to a 401(k).

TSP has many advantages, among them the G Fund, which is guaranteed never to lose money, as well as the ultra-low management fees the TSP funds charge. But like many defined contribution plans, TSP’s investment options are limited. Many current and former federal employees often wish that they had more flexibility in their investment options and could put their TSP funds to better use. That’s where a TSP rollover can come into play.

Rolling over funds from a TSP into an IRA can offer you a wider range of investment options. Whether you’re opening a rollover IRA at a brokerage firm or opening a self-directed gold IRA to buy precious metals, the rollover process is largely the same. In either case, rolling over funds to an IRA can open up your investment possibilities.

Here are the three easy steps to rolling over your TSP into an IRA.

1. Open an IRA

The first step in your TSP to IRA rollover is to open up an IRA account. This means finding an IRA custodian who will manage your account.

For the purposes of this guide, we’ll assume that you’re going to roll over either all or part of your TSP account into an IRA. We’ll also assume that you want to do a direct rollover from your TSP account to an IRA account. This way you can make that rollover tax-free.

If you were to make an indirect rollover, in which the money is sent to you first, you would have 20% taken out of your rollover to pay taxes and you would have to make that money up when you deposit it into your new IRA account. Indirect rollovers add an extra layer of complexity and expose you to potential tax consequences which in most cases you’re not going to want.

If you’re opening an account with a brokerage firm, the brokerage will normally be your custodian. If you’re starting a self-directed gold IRA or silver IRA to purchase precious metals, you’ll need to find a custodian that manages precious metals IRA assets. Goldco works with experienced IRA custodians who have helped numerous customers manage their gold and silver IRAs.

Once you’ve opened the IRA account that will be the destination for your TSP funds, you’ll need to add that account information to your TSP account. When you log in to your TSP account, you’ll click on the profile icon at the top right of your browser window (it looks like a little person inside a circle).

Underneath “My Profile” you’ll see an option for “Financial Institutions” which you’ll click on. From there you’ll be prompted to add the name of your financial institution (i.e. your IRA custodian), the type of rollover you want (in most cases this will be to a Traditional IRA), the IRA account number, and the address to where TSP should send funds. This may not be the same as the standard mailing address for your IRA custodian, so you’ll want to clarify with your custodian where funds should be sent.

It’s important to note that this account information must be on file with TSP for at least seven days before you begin your TSP rollover. Make sure that you get this information correct, as changing information or adding a new account will reset that seven day clock. Once you’ve inputted your IRA account information, set a reminder so that you can come back in seven days to start your rollover.

2. Determine How Much Money to Roll Over

While you’re waiting, you can determine how much of your TSP you want to roll over into an IRA. This might vary depending on whether you’re still working for the government or if you’re retired or otherwise separated from government service.

Some people want to get out of the TSP entirely and roll over all of their funds into an IRA. Others may only want to do a partial rollover. And some others may want to roll over most but not all of their TSP funds.

Why might you not want to roll over all of your TSP funds? Well, there’s the safety net of having the G Fund available, as well as the low fund costs of the TSP’s other funds. Maybe you’ll find that your IRA fund fees are higher than you expected, or that the performance of your IRA investments hasn’t matched that of the TSP’s funds. In that case you might kick yourself if you’ve transferred all your funds, especially if you’ve left government service.

Once you’ve separated from the government, you can keep your TSP account open as long as it has a minimum balance of $200. And TSP accepts inbound rollovers from IRA or 401(k) accounts at any time, although there are some exceptions when it comes to Roth accounts. Familiarize yourself with those options, as maintaining your TSP account might be worth it just to have another backup for your investments.

3. Execute Your TSP to IRA Rollover

Okay, you’ve waited seven days to start your TSP rollover and you’ve determined how much money you want to roll over. Now’s the time to start your rollover.

You’ll log into your TSP account and navigate to “Withdrawals and Rollovers Out”. You’ll have a choice between making a partial distribution from your TSP (minimum of $1,000 distribution) or a total distribution from your account. Let’s assume for the sake of this example that you’re making a total distribution, i.e. moving all of your funds out of your TSP.

When you click on total distribution you’ll move to Step 1 and will be asked how you want to receive your withdrawal. You can roll over funds to an IRA or an employer’s 401(k), you can have a partial rollover with an amount paid to you, or you can have the full amount paid to you.

If you choose the rollover option, you’ll be prompted to select IRA, Roth IRA, or Employer Plan. If you choose the partial rollover option, you’ll be asked the same thing. If you choose to have the full amount paid to you, you’ll be warned that you may have to pay taxes and a 10% penalty. For the sake of this guide, we’ll assume that you’re rolling over the full amount to an IRA.

Once you’ve chosen to roll over funds to an IRA, you’ll make your rollover choices in Step 2. You’ll be shown your requested withdrawal amount, which in this case is the entirety of your TSP. Then you’ll select the amount you want to roll over.

You can select “All of the Cash Available”, “Specific Amount”, or “No Cash”. If you select either of the latter two options, you’ll be hit with 20% withholding and may have to pay taxes or penalties. If you’re looking to roll over to an IRA, you’ll want to choose “All of the Cash Available”.

Then you’ll be shown your total payment in Step 3. The “Gross Cash Payment” is the amount you’re withdrawing from your TSP. If you are rolling over everything to an IRA, the “Gross Cash Payment” and “Rollover” sums should be identical, and the amount shown under “Federal Withholding” should be zero. If the “Federal Withholding” sum is not zero, back up because you’ve made a mistake.

Step 4 is to read about the rights associated with your rollover payment. Once you click that you’ve received and reviewed the information, you move to Step 5.

At Step 5 you choose the destination for your rollover. You should see your IRA custodian listed here and you will select that option. You’ll also see a notice that your institution should receive a paper check 5-7 business days after the payment has been processed.

From there you’ll move on to review everything in Step 6, and complete the rollover in Step 7. The steps for partial distributions, in which you only withdraw a portion of your funds, is largely similar. But again, if your intent is to roll over your TSP funds directly to an IRA, the most important thing to remember is that the “Federal Withholding” sum in Step 3 is zero. That ensures that the entirety of your rollover is being deposited into your IRA.

So now you’ve completed your TSP rollover and everything is good to go, right? Well, not exactly.

If your spouse is on file with TSP, your spouse will have to approve the rollover too. Your spouse will receive an email prompting them to e-sign their acceptance of the rollover.

TSP Rollover Timeline

We’ve already established that you have to have your IRA account information on file with TSP for at least seven days. If you initiate your rollover after 12PM ET, it will be processed the next business day. And it can’t go through until your spouse signs off.

Once your spouse signs off, expect it to take about 2-3 business days for funds to be paid out. And from there it could take 3-7 business days before your IRA custodian receives the funds. If your custodian offers online access to your account, keep checking to see if the funds have made it. And if you don’t have online access to your IRA account, call your custodian after a week to see if they’ve received the funds. All in all, expect the entire process to take about two weeks.

Most TSP to IRA rollovers go off without a hitch. The process can be a little unnerving, especially if you’re rolling over a large sum of money, but the choices that you can unlock after doing a rollover can make the process worth it.

If you’re looking to roll over TSP assets so that you can invest in a gold IRA, Goldco’s IRA specialists can help answer any questions you may have. We have helped thousands of customers over the years, including many who have done TSP to gold IRA rollovers, and have made over $1 billion in precious metals placements. So if you’re looking to move your TSP funds into gold, contact the experts at Goldco today.