TSP rollover


Q. I recently retired from the military. I had $30,000 in the Thrift Savings Plan. I have no plans on returning to federal service. I have Roth IRAs with two other private companies, each with less than what I had in the TSP. I want to remove these from TSP and place into either a new Roth or one of my existing accounts, which makes more sense as a larger pot of money will earn me more since I can continue to contribute. This opens a new concern as the limitations of combined income and contributing to a Roth. I am about to exceed that income level. So I am faced with either a TSP account to which I can no longer contribute, or an existing Roth account that I can no longer contribute to, but that pot would be larger.

1. Will I be penalized for moving funds from my TSP in complete withdrawal to placing them into an existing Roth IRA?

2. Does the same apply for a traditional IRA?

3. What about the company 401(k) for where I work now?

Ultimately, I will make the decision on what is best for this $30,000. It appears there is no scenario where I can withdraw without a penalty (I contemplated buying land with it). I am concerned that whatever I do, I will be taxed with a penalty and/or this will be added to my gross income for that tax year, which will spiral me into the second-highest tax bracket, causing me significant financial distress.

A. You may roll over your TSP account to a Traditional IRA without penalty. You may also covert your TSP balance to a Roth IRA without penalty, but you will owe the tax for converting.


About Author

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 fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

Leave A Reply