TSP

TSP Rollover

You may rollover your TSP to an IRA as TSP-equivalent funds in brokerages have cheaper fees (since 2023, with the exception of the G fund.) However, it’s recommended to not roll it all out and to leave $200 in the TSP G Fund to keep the account open ($200 is the minimum and the G fund prevents your account from going below). This allows you to roll back into the TSP, if ever desired. If the TSP is fully rolled out, you lose access to the TSP unless you re-enter federal employment.

Some standout reasons as to why you’d want to retain your TSP:

  • Penalty-Free Withdrawals: If you separate from federal service at age 55 or older, you can withdraw from your TSP penalty-free whereas an IRA has a 10% early-withdrawal penalty before age 59 1/2.
  • Protection: Your TSP is protected from most lawsuits and bankruptcy claims. An IRAs protection varies on state-specific laws.

TSP In-Service Loan

If you have a built up TSP, consider a TSP in-service loan against your TSP funds. If you apply while you are still employed you get better terms and can carry those terms into unemployment. Interest is paid back to yourself. This is much better than doing early withdrawals or living off of credit cards.

Substantially Equal Periodic Payment (SEPP)

Have a sizable TSP balance, but are not 55? There is a way to tap your TSP funds should you be laid off, the SEPP. This is a method of distributing funds from an individual retirement account (IRA) or other qualified retirement plans (unless you still work for your employer) prior to the age of 59½ that avoids incurring IRS penalties for the withdrawals. Typically, an individual who removes assets from a plan prior to that age will pay an early withdrawal penalty of 10% of the distributed amount. Funds in SEPP plans are withdrawn penalty-free through specified annual distributions for a period of five years or until the account holder turns 59½, whichever comes later. Income tax must still be paid on the withdrawals. This is really good for people who are just a few years away from retirement, but are let go. This can give you the funds needed to bridge the gap between now and when your pension starts up.