Penalty-free TSP transfer to VCP?


Q. I am planning to retire next year. If Congress extends the Roth rollover provision, I am interested in pursuing the following scenario: I have funds in the Thrift Savings Plan that will be fully taxable upon withdrawal. If I withdraw them upon retirement (at 56), I will be taxed on them but not subject to the 10 percent penalty. I propose to take those funds and immediately (within the same day if possible) transfer them to the CSRS Voluntary Contribution Program account, which then could also allow a rollover into a Roth account.

Therefore, am I permitted to fund the CSRS VCP account with “after-tax” funds that would come from a TSP?

I also understand that the tax on the TSP withdrawal must come from outside funds and not from the TSP proceeds?

A. You may fund a CSRS VCP account with any after-tax money you like, but not after you retire. Even without this limitation, I don’t know why you’d want to convert your TSP account assets to a Roth IRA, paying tax now rather than paying tax later and giving up the advantages of the TSP.


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Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to and view his blog at

1 Comment

  1. Bozo bozo on

    Why not transfer $ from your regular TSP to a Roth TSP now because the economy has reduced the amt in there. Therefore less taxes to pay to get the amt into a Roth TSP acct.

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