A recent TSP study showed that 45% of separated participants move all of their money out of the TSP within a year of their separation. Many of those who close their TSP accounts do so by means of a direct rollover. The correct terminology for moving money from the TSP to an IRA or another tax advantaged account is “rollover”, though many financial planners will call it a “transfer”.

Rollovers have been allowed in IRAs since the 1970s and in the TSP since its inception. When rollovers began, and until the mid-1990s, as long as the money that was withdrawn from the TSP (or other tax advantaged account, such as an IRA) was rolled into another tax advantaged account within 60 days, there was no tax due and there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). Nowadays, almost all rollovers are done directly.


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:

Unlike rolling money into the TSP, there are currently strict limits on the number of rollovers that can be done when you are rolling money out of the Thrift Savings Plan; this will likely change with the implementation of the TSP Modernization Act in 2019. Currently, you are given only two opportunities to withdraw from the TSP – and a withdrawal is the method by which you roll money out of the Thrift Savings Plan.

See also TSP Transfers at ask.FEDweek.com

While still working, if you are age 59 ½ or older, you are allowed to take an age based withdrawal, which is considered an eligible rollover distribution for tax purposes. You can take only one age based withdrawal and, if you do, you will not be eligible to take a partial withdrawal after separation. 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 a partial single withdrawal (using form TSP-77) if you had not previously taken an age based withdrawal while employed. You are also allowed to take a full withdrawal (using form TSP-70). Both partial and a full withdrawals are considered to be eligible rollover distributions.

The TSP has a publication, Transfers From the Thrift Savings Plan to Eligible Retirement Plans, for plan administrators of IRAs or other qualified plans; you might want to provide this publication to the custodian of the account into which you are rolling your TSP. This publication is available in the “Forms and Publications” section of the TSP’s website.

You need to be very careful when filling out any TSP form because once an action is processed, it cannot be undone. Make sure both you and the custodian of the receiving plan/IRA complete your parts accurately.

The TSP discourages rollovers out of the plan; no surprise. Here’s what they say in one of their publications: “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.”