TSP rollovers


Q: I have a question about the limited withdrawal options in the TSP.  I’m 58 and retired with an early-out from the Postal Service.  I took out a few thousand to get my retirement started and I’m leaving the balance in until I reach 62 1/2.  My main reason for this is the low fees of the TSP.  The snag is that I’d like to make further withdrawals for certain investments, side businesses, etc.  Not a lot, of course, as I would never stupidly blow through my retirement, but the TSP has their second withdrawal as an ‘all or nothing’ option and I DON’T want to take it all.  Here’s my question:  Since the TSP allows you to rollover your IRA or 401K into the TSP, even after retiring; is it possible to take a structured withdrawal from the TSP, rollover the payments into an IRA, use what you need and then roll the money back into the TSP?

I keep hearing that the TSP board realizes that TSP participants don’t like the limited choices and withdrawal options, and are considering changing them, but any questions about when these ‘big changes’ are going to happen are met with ‘Not in our lifetimes’ type answers.  So, can I take my money out of the TSP in full as monthly payments; put them into an IRA then transfer them back into the remaining balance of the TSP?  I would like some access to my money without the only option of withdrawing everything.  If the money (or part of it) was in an IRA I could at least use some of it for growth plans, metals for hedging against a crash, or a side business.

A: As you mention, you may transfer any pre-tax IRA balance to your existing TSP account any time you like. The problem with your strategy may be ensuring eligibility for the rollover of the monthly payments to an IRA in the first place. If  your monthly payments aren’t large enough, they will be ineligible for rollover to an IRA. See the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf for more information.


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

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