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Although the correct terminology for moving money from the TSP to an IRA or another tax advantaged account is “rollover”, many planners and others will call it a “transfer” – that’s what we’ll discuss here. (To learn about rolling money into the TSP from another qualified plan, see: Rollover Into the TSP from an IRA)

Rollovers have been allowed in IRAs since the 1970s and in the TSP since its inception in 1987. When rollovers began, and until the mid-1990s, as long as the money that was withdrawn from the TSP (or other tax advantaged account, such as an IRA) was rolled into another tax advantaged account within 60 days, there was no tax due and there was no withholding. But a major change occurred in the 1990s; taxes were withheld from any rollover that was not a direct rollover (i.e., the money went directly from the IRA or TSP to the other qualified account).


If you had TSP money sent to your checking account, this would be considered an indirect rollover and taxes would be withheld from the payment. Even if it was your intent to roll it over into an IRA the next day, 20% would be withheld for federal income taxes. You would be able to recoup the withheld money if you roll the entire amount over into a qualified account within 60 days.

Here is an example:

Direct Rollover
Amount rolled or transferred: $200,000
Withholding: $0
To IRA: $200,000

Indirect Rollover
Amount rolled or transferred: $200,000
Withholding: $40,000
To IRA: $160,000

You should make sure that you do a direct rollover (transfer) whenever you are moving money between tax-advantaged accounts. Almost all financial advisers are aware of this and will work with you to make sure that you execute a direct rollover.

How would you do a rollover?

While still working, if you are age 59 ½ or older, you are allowed to take up to four age based withdrawal’s per year, as long as they are at least 30 days apart. This is similar to taking a partial withdrawal after separation and is considered to be an “eligible rollover distribution” for tax purposes. You would use a form TSP-75 for an age based withdrawal and have your financial adviser complete the part of the form that deals with transferring money out of the TSP.


Once you are separated, you are allowed to take multiple “single withdrawals” (using form TSP-99) as long as each withdrawal is at least $1,000. You are also allowed to take a full withdrawal (using the same form). Both a single and a full withdrawal are considered to be eligible rollover distributions.

Details on all post separation withdrawals can be found at Withdrawing from Your TSP Account for Separated and Beneficiary Participants. Details on in-service withdrawals can be found at In-Service Withdrawals (tsp.gov).
When you are requesting any type of withdrawal, great care should be taken when filling out the withdrawal form because once an action is processed by the TSP, it cannot be undone – you want to get it done right the first time, because there will be no second time.

When we looked at rollovers into the Thrift Savings Plan, we saw that the TSP encouraged them. Therefore, we shouldn’t be surprised when the TSP actively discourages rollovers out of the plan. Here’s what they say: “Other financial institutions might try to pull you away from the TSP. Don’t let them distract you with expensive funds and confusing choices. The TSP likes to keep things affordable and simple. Why move your hard earned money to a financial plan that might be too good to be true? Stay with the TSP.”

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