TSP Rollovers in 2026: Moving Money In, Out, and the IRA Decision

1. The two directions a rollover runs

TSP rollovers move retirement money between the TSP and other qualified accounts. The word “rollover” gets used loosely, so start with the basic geography: a rollover can run into the TSP or out of it, and the rules are different in each direction.

Money into the TSP comes from an old employer’s 401(k), a 403(b), a 457(b) plan, or a traditional IRA — typically when you start federal service with retirement savings already accumulated elsewhere, or when you want to consolidate a scattered set of old accounts.

Money out of the TSP goes to an IRA or a new employer’s plan — typically when you separate from federal service and are deciding what to do with the balance.

Most federal employees only think about the outbound direction, and only at retirement. That’s a missed opportunity. The inbound rollover — pulling an old, expensive 401(k) into the low-cost TSP — is one of the most underused good moves available to federal employees, and you can do it at any point in your career.

2. Rolling money INTO the TSP

The TSP accepts inbound rollovers any time your account is open and has a balance above zero — including after you’ve separated from federal service, and even after you’ve started taking distributions.

What the TSP will accept into your Traditional balance:

• Traditional (pre-tax) money from a 401(k), 403(b), or 457(b) plan
• Pre-tax money from a traditional IRA or SIMPLE IRA
• Both direct and indirect rollovers of this pre-tax money

What the TSP will accept into your Roth balance:

• Roth money transferred directly from another employer’s Roth 401(k), Roth 403(b), or Roth 457(b)

What the TSP will NOT accept — this is where people get tripped up:

The Roth IRA exclusion surprises people every time. You can roll a Roth 401(k) into your Roth TSP, but you cannot roll a Roth IRA into your Roth TSP. It doesn’t follow any obvious logic — it’s simply written into the law. If you have a Roth IRA, it stays a Roth IRA; the TSP won’t take it.

Why roll an old 401(k) into the TSP? Two reasons. First, cost — TSP expense ratios run 0.048% to 0.079%, well below what most private 401(k) plans and many IRA funds charge. Moving an old account from a 1% plan into the TSP can save real money every year for the rest of your career. Second, consolidation — one account is easier to manage, rebalance, and track against your retirement targets than four scattered ones.

How to do it: The TSP offers a rollover concierge service — call the ThriftLine and a rollover specialist walks you through each step — or a self-service option in My Account. The form is TSP-60 for traditional money, TSP-60-R for Roth. Your old plan administrator has to certify and release the funds.

For more on how the TSP’s costs compare and where rolled-in money lands, see TSP Funds Explained: a 2026 complete guide.

3. Rolling money OUT of the TSP

Outbound rollovers work differently. The TSP only releases money as part of a withdrawal, which means you generally need to have separated from federal service (or qualify for an in-service withdrawal) before you can roll money out.

The matching rule for tax treatment:

• Traditional TSP rolls to a Traditional IRA or a traditional employer plan — no tax
• Roth TSP rolls to a Roth IRA or a Roth employer account — no tax
• Traditional TSP rolled to a Roth IRA — this is a conversion, and the entire amount is taxed as ordinary income in the year of the rollover

Certain TSP distributions are “eligible rollover distributions” that can be moved this way: any post-separation distribution of part or all of your account, automatic force-outs of balances under $200, and installment payments expected to last fewer than 10 years. Some distributions are not eligible to roll over — notably required minimum distributions once you’ve reached RMD age, and payments that are part of a life-expectancy installment stream expected to last 10+ years.

Money rolled out of a Roth TSP carries one subtle issue: if it’s going to a brand-new Roth IRA, the Roth IRA’s own five-year clock starts fresh at the rollover. More on that in section 6.

4. Direct vs indirect rollover — and why indirect is usually a mistake

Every rollover, in either direction, happens one of two ways. The difference is who touches the money — and it has real tax consequences.

Direct rollover. The money moves institution-to-institution. The TSP sends a check directly to your IRA custodian (or the reverse). You never take possession of the funds. No tax is withheld, no tax is triggered, no penalty applies.

Indirect rollover. The plan sends the money to you. You then have 60 days to deposit it into the receiving account. Miss the 60-day window and the entire distribution becomes taxable — plus a 10% early withdrawal penalty if you’re under 59½.

Indirect rollovers out of the TSP carry an additional, expensive wrinkle: mandatory 20% withholding. When the TSP distributes traditional money to you for an indirect rollover, it must withhold 20% for federal taxes. Here’s the trap that creates:

If you only deposit the $80,000 you received, the missing $20,000 is treated as a taxable distribution — taxed as ordinary income, and hit with the 10% penalty if you’re under 59½. You’d get the $20,000 of withholding back as a refund when you file, but only the following year, and only after the damage is already structured into your tax return. To do an indirect rollover correctly, you have to front the withheld 20% out of your own pocket.

The conclusion is simple: use direct rollovers. A direct rollover has no withholding, no 60-day pressure, and no possibility of an accidental taxable event. There is almost no situation where an indirect rollover is the better choice for a federal employee. The 60-day indirect rollover exists mostly as a legacy mechanism; treat it as a trap, not an option.

With a direct rollover, the money moves institution to institution and you never touch it — no withholding, no 60-day clock, no accidental tax bill. With an indirect rollover, one missed deadline turns your entire retirement balance into taxable income. Always choose direct.

5. The big decision: stay in the TSP or move to an IRA

This is the decision that actually matters, and it’s the one the financial industry has the strongest opinion about — because there’s money in it for them.

When you separate from federal service, you have four basic options: leave the money in the TSP, roll it to a new employer’s plan, roll it to an IRA, or cash it out (almost never the right move). The real contest is usually stay in the TSP vs roll to an IRA.

Here’s the honest comparison.

The case for staying in the TSP: It’s one of the lowest-cost retirement plans in existence. The G Fund has no equivalent anywhere in the private market. If you separated in or after the year you turned 55, the Rule of 55 lets you take penalty-free withdrawals before 59½ — and that protection vanishes the moment you roll to an IRA. Since the 2019 TSP Modernization Act, withdrawal flexibility is far better than its old reputation suggests.

The case for moving to an IRA: Broader investment options — thousands of funds and ETFs instead of five core funds. Easier consolidation if you have retirement money in several places. More withdrawal structuring options. Simpler estate planning in some cases.

The conflict of interest you should know about. FINRA itself warns about this: financial professionals who recommend rolling your TSP into an IRA often earn commissions or fees on that move. Leaving your money in the TSP — or rolling it to a new employer’s plan — usually earns them little or nothing. That doesn’t make every rollover recommendation wrong, but it means you should understand why the recommendation is being made. The TSP’s costs are hard to beat, and “more investment choices” is only valuable if you’ll actually use them well.

A common middle path: Keep enough in the TSP to bridge ages 55-59½ under the Rule of 55, and roll the rest to an IRA if you want broader investment access. You don’t have to choose all-or-nothing — partial rollovers are allowed.

The chart shows the heart of the stay-or-roll math. If you roll to an IRA and buy low-cost index funds at 0.10%, the fee difference versus the TSP is small — about $6,000 over 15 years on a $400,000 balance. But if your IRA funds carry a 0.50% expense ratio, the TSP’s fee advantage grows to roughly $66,000, and at 1.00% it exceeds $135,000. The account type isn’t what matters — the expense ratio of what you actually buy is. A rollover to an IRA full of expensive funds is one of the most quietly costly mistakes a federal retiree can make.

For the full set of post-separation withdrawal mechanics, see TSP withdrawal options in 2026. For how the Roth side of this interacts with conversions, see Roth vs Traditional TSP in 2026.

6. The traps that cost real money

Several rollover mistakes are common, expensive, and entirely avoidable.

The Rule of 55 disappears permanently. If you separate from federal service between ages 55 and 59½ and roll your TSP to an IRA, those dollars now require age 59½ for penalty-free access. There is no way to restore the Rule of 55 once the money leaves the TSP. If there’s any chance you’ll need penalty-free access before 59½, keep enough in the TSP to cover those years before rolling anything out.

The Roth five-year clock resets. When you roll Roth TSP money to a Roth IRA, the Roth IRA’s five-year clock does not inherit the time your money spent in the Roth TSP. It starts fresh at the rollover. If you’ve already had any Roth IRA open for five or more years, this is a non-issue — that existing clock governs. But if this rollover opens your very first Roth IRA, you may have to wait five years before the earnings come out tax-free.

Indirect rollover withholding. Covered in section 4 — the 20% withholding on an indirect rollover out of the TSP, and the requirement to replace it from personal funds. Avoid the whole problem with a direct rollover.

Rolling an RMD. Once you’re at RMD age, the year’s required minimum distribution can’t be rolled over. Take the RMD first, then roll the rest.

Outstanding TSP loan at separation. A rollover does not extinguish an outstanding TSP loan. If you separate with a loan balance, that loan must be repaid or it becomes a taxable distribution — independent of whatever you do with the rest of your account. Resolve the loan first. See TSP Loans in 2026 for the separation mechanics.

Tax-exempt money from combat zone service. Uniformed services members who contributed from tax-exempt combat zone pay have a special situation. Front-line TSP customer service may tell you tax-exempt funds can’t be directed to a Roth IRA and try to pay them out as cash. They can be rolled to a Roth IRA — it just requires sequencing the rollovers correctly. If this applies to you, the order of operations matters, and it’s worth getting specific guidance before initiating. Service members navigating a disability separation alongside these decisions can find more at Warrior Disability’s guide to the medical separation process ↗.

7. A clean rollover, step by step

For a straightforward direct rollover out of the TSP after separation:

1. Resolve any outstanding TSP loan first. It won’t roll over and it becomes taxable if left unpaid.
2. If you’re at RMD age, take the year’s RMD before initiating the rollover. RMDs can’t be rolled.
3. Open the receiving account — the IRA or new employer plan — before you start. The TSP needs a destination that will certify it accepts the funds.
4. Confirm the tax-type match. Traditional to traditional, Roth to Roth. Only send traditional to a Roth IRA if you specifically intend a taxable conversion.
5. Request a direct rollover through My Account or the ThriftLine. The TSP issues a check directly to the receiving institution — never to you.
6. For inbound rollovers, use the rollover concierge service or My Account, with form TSP-60 (traditional) or TSP-60-R (Roth). Your old plan administrator certifies and releases the funds.
7. Keep the paperwork. You’ll receive tax forms (1099-R from the sending plan, 5498 from the receiving IRA) the following year. A correctly executed direct rollover is reported but not taxed — the forms document that.

The whole process is routine when it’s a single money type going direct. It gets complicated only when there are multiple money types, an outstanding loan, an RMD in play, or an indirect rollover. Each of those is avoidable or manageable if you handle it deliberately.