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A Guide to Rolling a Thrift Savings Plan (TSP) into a Rollover IRA

As you progress through your career, it's important to take control of your retirement savings and make strategic decisions to secure your financial future. If you are a federal employee or a member of the uniformed services, you are likely familiar with the Thrift Savings Plan (TSP) as a valuable retirement savings tool. However, when the time comes to transition out of federal service, rolling your TSP into a rollover Individual Retirement Account (IRA) can offer you increased flexibility and potential benefits. In this article, we will guide you through the process of rolling your TSP into a rollover IRA, highlighting important considerations along the way.

Rolling over a Thrift Savings Plan (TSP) into a rollover Individual Retirement Account (IRA) can be a smart move for individuals who have left their federal employment and want to maintain control over their retirement savings. Here are the steps you can follow to roll your TSP into a rollover IRA:

Understand the benefits of a rollover IRA

Before you decide to roll over your TSP into a rollover IRA, it's important to understand the benefits. A rollover IRA can provide greater investment options, lower fees, and more flexibility than a TSP. With a rollover IRA, you have the freedom to invest in a wider range of assets, including stocks, bonds, mutual funds, and exchange-traded funds (ETFs). You can also choose your own financial institution to manage your account, which can provide you with more personalized service and support.

The Process:

Before diving into the rollover process, it's crucial to have a clear understanding of the TSP and the rollover IRA.

a. Thrift Savings Plan (TSP): The TSP is a retirement savings plan available to federal employees, including members of the uniformed services. It offers tax advantages and low-cost investment options, making it an attractive choice for retirement savings during your federal service.

b. Rollover Individual Retirement Account (IRA): A rollover IRA is an individual retirement account that allows you to transfer funds from a qualified retirement plan, such as the TSP, without incurring taxes or penalties. It provides greater investment options and flexibility in managing your retirement savings.

Evaluate Your Options:

Consider the advantages and disadvantages of rolling your TSP into a rollover IRA. While the TSP offers low-cost funds and simplicity, a rollover IRA can provide access to a broader range of investment options and more control over your retirement savings. Additionally, a rollover IRA allows you to consolidate multiple retirement accounts into a single account, simplifying your financial management.

Confirm Eligibility:

Ensure that you meet the eligibility criteria for rolling your TSP into a rollover IRA. Typically, you are eligible to roll over your TSP balance if you have left federal service or are in the process of leaving.

Initiate the Rollover Process:

You can now initiate a Rollover from TSP.gov. Once you log in, click “more” in the top menu, then “Withdrawals and Rollovers.” Select the type of withdrawal- when rolling into an IRA the most common selection is Total Distribution. The website will then walk you through the process of executing the rollover. You could have it mailed to you, where you can mobile deposit it into your IRA as long as you don’t endorse the check. A better option would be to mail it directly to your custodian (brokerage) that holds your IRA. Have your account number and their mailing address ready. *Make sure you are doing a direct rollover, and that any qualified (pre-tax) funds are rolled into a traditional IRA and Roth funds are rolled into a Roth IRA.*

Review Investment Options:

Once the funds are successfully rolled over, assess the investment options provided by your new rollover IRA. Diversify your investments based on your risk tolerance and long-term goals. Take advantage of the expanded investment choices compared to the TSP to tailor your portfolio to meet your specific needs.

Wright Wealth has experience managing TSP accounts as well as facilitating rollovers, so let us know if we can be helpful in evaluating your options.

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