How to Rollover a TSP to an IRA

By Sofia Rossi3 min read 282 views

How to Rollover a TSP to an IRA

A TSP rollover moves your federal retirement savings into an Individual Retirement Account, giving you more investment choices and potential estate-planning advantages. You can execute a direct rollover, where the TSP sends funds straight to your IRA custodian, or an indirect rollover, where you receive a check and deposit it yourself within 60 days. A direct rollover is almost always the safer choice because it avoids mandatory tax withholding and the risk of missing the 60-day window.

Table of Contents

How to Rollover a TSP to an IRA
Eligibility and Timing
Choosing Between Direct and Indirect Rollovers
Steps to Complete the Rollover
Tax and Reporting Considerations

Eligibility and Timing

You can roll over your TSP at any age if you separate from federal service, or if you are age 59½ or older and still employed. The TSP allows one rollover per 12-month period for most participants, with an exception for certain life-event rollovers. There is no penalty for moving funds to a traditional IRA, but if you intend to convert to a Roth IRA, the converted amount is taxable as ordinary income in the year of conversion.

Choosing Between Direct and Indirect Rollovers

A direct rollover is a trustee-to-trustee transfer that never touches your hands and avoids the 20% mandatory withholding that applies to indirect rollovers. With an indirect rollover, you receive a check payable to the new IRA custodian and must deposit the full amount, including the withheld 20%, within 60 days. If you fail to deposit the withheld portion, the IRS treats it as a taxable distribution and may impose a 10% early withdrawal penalty if you are under age 59½.

Steps to Complete the Rollover

Open a traditional or Roth IRA with a custodian of your choice.

Request a TSP withdrawal using form TSP-10 or the TSP website.

Select "direct rollover" and provide the IRA account number and routing details.

Confirm the transfer with both the TSP and the IRA custodian.

Verify the funds arrive and invest them according to your IRA strategy.

Tax and Reporting Considerations

The TSP will issue a 1099-R for the rollover year. Report the distribution on your tax return as a rollover if it was a direct transfer, and keep records showing the IRA custodian's receipt. If you rolled over to a Roth IRA, the converted amount flows to line 4b of Form 1040, and you may owe taxes on that sum for the tax year of conversion. Consulting a tax professional before a Roth conversion is a common step to understand the year-of-impact on your bracket.