How to decide whether to keep the TSP or roll to an IRA

Is the TSP really cheaper than an IRA?

Often yes, but your own numbers settle it. Many people believe an IRA's longer fund menu makes it the better home. Look up the current TSP expense ratios and the IRA's fund costs, then multiply the balance by the gap: $540,000 × 0.40% = $2,160 each year. If the gap is that wide, the extra menu has to earn that back. Savant Wealth Management runs this two-line check before anything else.

What happens if I roll to an IRA at 58?

An IRA rollover at 58 usually locks the money behind the 10% early-withdrawal penalty until 59½. The age-55 separation exception reaches the TSP and the 401(k) at the job you just left, but it doesn't reach IRAs. People assume an IRA is always more flexible. Before 59½, it is less.

The gap between 55 and 59½ is the row that matters, because that's where the TSP and the old 401(k) beat an IRA on access.

A hypothetical household: Lamar, 58, a divorced Navy Reserve chief with 24 good years and a job as an IT manager at a hospital system, holds $300,000 in the TSP and $240,000 in his hospital 401(k). He stops working this spring. Age 59½ is 18 months away and he needs $5,000 each month, so 18 × $5,000 = $90,000. Reserve retired pay doesn't start until 60.

The smart-looking move is to roll the whole 401(k) into an IRA for fewer accounts and more funds. Drawing that $90,000 from the IRA before 59½ adds a 10% penalty, $90,000 × 10% = $9,000, on top of income tax he'd owe from any account. The fix is to keep $90,000 in the 401(k), which he can tap penalty-free because he left that employer in the year he turned 58. He rolls the other $150,000 now ($240,000 − $90,000). Penalty: $0. An IRA rollover can't be sent back to the hospital plan afterward, so the split has to be decided first.

On taxes, a direct rollover isn't taxable; it appears on a 1099-R as a rollover, not as income. Withdrawals from all 3 accounts are ordinary income, so the 10% additional tax is the only difference. With his wages gone, Lamar's bridge withdrawals sit on top of a $16,100 single standard deduction (2026). The court-ordered share of his retired pay that DFAS pays directly to his former spouse starting at 60 is taxed to her, not to him.

Before any rollover form, Savant Wealth Management writes down 2 numbers: the date Lamar turns 59½ and the cash he needs until then. Only then does it decide which dollars move. He should also check the separation date the TSP has on file for his Reserve service, because the TSP's own age-55 exception depends on it.

Who should keep the TSP or roll to an IRA?

Keep the TSP if you need cash before 59½ or want its low costs; roll part of it if you need something only an IRA offers. Lamar, 58, keeps his bridge money in his plans because he needs cash before 59½.

A hypothetical retired Coast Guard officer, 71, gives $10,000 each year to her church, so she rolls part of her TSP to an IRA. Qualified charitable distributions, allowed from 70½, can come from an IRA but not from the TSP.

The usual advice to keep the cheap TSP fails in a few places. Non-spouse heirs can't keep a TSP account and get paid out. The TSP takes each withdrawal proportionally from every fund you hold, so you can't sell only the G Fund in a bad stock year. If you want a fund the TSP doesn't offer, its mutual fund window carries extra fees. And a third route exists: moving the new or old 401(k) into the TSP.

Staying gives you low costs, the G Fund (no IRA has an equivalent) and age-55 access. You give up control over which fund pays each withdrawal, QCDs, and flexibility for heirs. Stock funds in the TSP or an IRA can lose value, including money you put in, so size the stock share to the years you'll wait.

Here is a quick test. Did your civilian job or your uniformed service end during the calendar year you turned 55 or later, and will you draw money before 59½? If both answers are yes, leave at least that amount in the TSP or in that employer's 401(k), and roll only the rest.

Titling matters as much as the choice. If the rollover check is made out to you, and not to the IRA custodian for your benefit, the direct rollover becomes an indirect one. On $100,000, the plan withholds $20,000 and mails you $80,000. To undo it, you add $20,000 from savings and deposit the full $100,000 within 60 days. The withheld $20,000 comes back at tax time. Miss the 60-day deadline and the $20,000 counts as income, with a $2,000 penalty on top if you're under 59½.

• Left job in or after year you turned 55
• Need withdrawals before 59½
• Leave that amount in the TSP or old 401(k)

Why do TSP transfers stall?

Transfers stall on paperwork, usually at the old plan. Moving a 401(k) into the TSP uses form TSP-60, and the old plan's administrator must complete and certify its section, which is the usual hold-up. A married participant's spouse must sign, with a notarized signature. Rollover checks must be payable to the receiving custodian for the participant's benefit, not to the participant.

Which part of a TSP rollover can I do alone?

You can run the fund-cost arithmetic and check your separation date and age milestones yourself. Deciding how much to leave in each plan until 59½, and in which order to move the rest, is worth an intro call with Savant Wealth Management before any form is signed.

Some plans allow only one partial withdrawal or a full payout, so read the plan's rules first; this page doesn't cover TSP installment amounts or dividing the TSP in a divorce, which takes a separate court order the TSP must accept.