Once you separate from federal service or the military, you do not have to move your Thrift Savings Plan (TSP) account. Per tsp.gov, you can generally leave it there if your vested balance is $200 or more. So the real question is whether moving it to an IRA gets you something worth having. This guide compares the two on the points that matter. It is general information; the TSP's own rules always control.
- TSP: a small menu of funds, published low expenses, and withdrawal options set by the plan.
- IRA: nearly unlimited investment choices and flexible withdrawals, but fees vary widely by provider and product.
- You can split the difference by moving part of your balance and leaving the rest in the TSP.
Fees: where the TSP is hard to beat, and where an IRA can compete
The TSP publishes its fund and administrative expenses at tsp.gov, and its core funds are index-style. An IRA has no single fee. You might pay fund expense ratios, account fees, trading costs or an advisory fee, or in the case of insurance products, rider charges and surrender charges. Ask any IRA provider for every annual cost in writing, then compare the total to the TSP's published figures. We do not quote specific percentages here because the TSP updates them each year.
Fund choices: simple menu vs. open shelf
The TSP offers a handful of individual funds plus target-date style lifecycle funds, which suits people who want a short, easy-to-manage list. An IRA can hold stocks, bonds, mutual funds, ETFs and, at some custodians, annuities. More choice means more ways to build a tailored plan, and also more ways to overpay or take on risk you did not intend.
- Choose the TSP if you value simplicity and are comfortable with its fund menu.
- Choose an IRA if you want investments or income products the TSP does not offer, or want to combine accounts you already have.
- Consider both if you want a low-cost core in the TSP and a more customized slice elsewhere.
Withdrawal flexibility after you retire
Per tsp.gov, separated participants can take a partial or total withdrawal, set up installment payments, or buy an annuity through the plan. An IRA is generally more flexible: you decide how much to take and when, subject to tax rules and any limits the provider sets. That flexibility is a benefit if your income needs change year to year, and a risk if it tempts you to withdraw too much too soon.
Not sure whether to move your TSP?
Tell us what you have and what you want it to do. We will lay out the tradeoffs, including leaving it alone. Free, no pressure.
Talk it through with a licensed agentTaxes and required minimum distributions
Traditional balances in either account are generally taxed as ordinary income when withdrawn, and a direct rollover is generally not taxable by itself. Required minimum distributions apply to both under IRS rules, and an RMD itself cannot be rolled over. Moving money between traditional and Roth can create a tax bill, so check with a tax professional first. If you do move money, a direct rollover avoids the withholding problems of an indirect one. See our guide to rolling over your TSP for the 60-day rule.
Where an annuity fits in the comparison
Some retirees want part of their savings to produce income they cannot outlive. The TSP offers an annuity option, and an IRA can hold an annuity from an insurance company. Annuities are not investments in the stock market, may carry surrender charges, fees and limits, and guarantees depend on the issuing company's claims-paying ability. See what to ask before an IRA rollover into an annuity and our annuities page.
Questions to ask before you decide
- What is the total annual cost of each option, in writing?
- Which features of the TSP would I give up, and do I actually use them?
- How will I take income, and which account makes that easier?
- Who is paid if I move the money, and how?
Availability and rules vary by state
TSP rules are federal. IRA providers and any insurance products, including annuities, vary by state and carrier. Honorbrook is licensed in the 11 states below, and each state's insurance regulator can verify an agent's license. For product availability where you live, fill out our short form or call (571) 354-0146.
- Virginia: Virginia Bureau of Insurance
- Maryland: Maryland Insurance Administration
- North Carolina: North Carolina Department of Insurance
- South Carolina: South Carolina Department of Insurance
- Georgia: Georgia Office of Insurance and Safety Fire Commissioner
- Alabama: Alabama Department of Insurance
- Louisiana: Louisiana Department of Insurance
- Texas: Texas Department of Insurance
- Michigan: Michigan Department of Insurance and Financial Services
- Indiana: Indiana Department of Insurance
- West Virginia: West Virginia Offices of the Insurance Commissioner
How Honorbrook helps
We are an independent agency. We will walk through your options, including leaving the money in the TSP, and tell you plainly when moving it does not make sense. We do not offer every product, and you should compare with the TSP itself.
This article is general information and is not tax, legal, investment or financial advice; a licensed agent can help with your situation. Guarantees are backed by the claims-paying ability of the issuing insurance company, not by any government agency.