fers retirement classes, federal government retirement seminars

Be Sure to Read This Before Rolling Over Your TSP Account Into an IRA

Pauline Haren
November 17, 2019

[vc_row][vc_column width=”2/3″ el_class=”section section1″][vc_column_text]The costs of the TSP fund are definitely one of the low-priced plans out there, even with the expenses going up over the years. That is why many experts recommend really thinking things through before moving your TSP balance into a third-party account.

The cost ratio for the C, F, & I funds is 4.1 points. The ration for all of the L, G, & S funds is 4.0 points. This means that 41 and 40 cents, respectively, for every thousand dollars contributed. However, even though those ratios are quite low, it isn’t the lowest.

There is a fund out there that has $0 expenses by Fidelity Investments. However, what’s the catch? Well, just like many promotional items out there, the main purpose is to get you into the store or the membership so that you will purchase other items at the normal price or even higher. Though zero expenses may seem tempting, the overall costs in the future may be more than what you would pay for your TSP account.

More importantly, if you are a federal employee who chooses to leave your money in the TSP after retirement don’t expect any help from the Thrift Savings Plan Board when it comes to advice. Similarly, the income options the TSP offers are significantly limited and the TSP Annuity, which is run by MetLife, simply isn’t a very good option at all.

For those that are turning 70.5 or will be soon, if you are considering rolling your traditional TSP into an IRA, be sure you receive your RMD (required minimum distribution) before you make this transition.

It is mandatory that you take your initial required minimum distribution at the beginning of the year that you become 70.5 years of age, even if it isn’t until the very last day of the year. You can defer the first distribution up until the first of April of the next year, but the RMD must be taken before you take other distributions.

If you have read of the 60-day rollover that is allowed once per year, this is only eligible from one Roth IRA to another and from a traditional IRA to another traditional IRA. These rollovers do not count on TSP plans and IRAs. Though this also does not count with direct rollovers, if you plan to roll your balance into an IRA, make sure it is a straightforward rollover.

If you considering a TSP to IRA rollover make sure you work with a knowledgable professional who understands your retirement benefits and knows the ins-and-outs of the TSP. Making a mistake and selecting a TSP income option can be irreversible and is seldom the best option once you consider all of the available choices out there.[/vc_column_text][/vc_column][vc_column width=”1/3″][vc_single_image image=”36133″ img_size=”292×285″ style=”vc_box_shadow”][/vc_column][/vc_row]