Employees who leave federal service can withdraw money from their Thrift Savings Plan or roll over the funds to an IRA or an employee-sponsored retirement plan once the new account is active. Employees may have to pay taxes and penalties on withdrawals and transfers, depending on their age and the types of their investments, according to TSP.gov.
Employees can invest their TSP contributions into different types of funds, including traditional and Roth IRAs. When former employees make transfers from their TSP, the types of accounts that are making and receiving the transfers impacts whether employees owe taxes on the rollovers. Employees should consult tax advisers before establishing new accounts and scheduling transfers, notes TSP.gov.
Former federal employees don't have to transfer money from their TSP upon retirement, although they can't make new contributions, explains GovExec.com. The TSP offers low administrative costs and access to an exclusive U.S. Treasury security that's available only to TSP members. Retirees can schedule regular monthly payments from their TSP, or they can make withdrawals as needed.
Former employees who roll their TSP funds into new IRAs pay significantly higher fees with the new plans, advises The Washington Post. Despite the higher fees, some retirees choose to move their money to consolidate various accounts and to access more investment options.