TSP Decisions
Understanding your TSP options.
The TSP offers federal employees a powerful retirement savings vehicle — but the decisions surrounding it are not always straightforward. This page provides an educational overview of the key choices federal employees face.
The information on this page is educational in nature and does not constitute investment, tax, or legal advice. There is no single answer that is appropriate for every federal employee. Individual circumstances vary significantly. Consider speaking with a qualified financial professional before making decisions about your TSP.
Leaving money in the TSP
The TSP offers low-cost investment options and the ability to keep assets in the plan after retirement. Some federal employees choose to leave their TSP balance in place and take withdrawals as needed. Others prefer to move assets to an IRA or other account for reasons related to investment flexibility, estate planning, or income strategy. There is no single answer that is appropriate for every federal employee.
Partial withdrawals
Retired federal employees can take partial withdrawals from their TSP at any time. This can provide flexibility for one-time expenses or supplemental income needs. Understanding how partial withdrawals interact with your overall income plan — including taxes and Required Minimum Distributions — is worth considering.
Installment payments
The TSP allows retirees to set up monthly, quarterly, or annual installment payments. Payments can be a fixed dollar amount or based on life expectancy. Each approach has different implications for how long your TSP balance may last and how your withdrawals are taxed.
TSP rollovers
Some federal employees choose to roll their TSP balance into an IRA after retirement. An IRA may offer a broader range of investment options, more flexibility in withdrawal timing, and different estate planning features. However, the TSP also has advantages — including very low expense ratios and certain creditor protections. A rollover is a permanent decision that deserves careful consideration.
Traditional vs. Roth TSP
Contributions to the traditional TSP are made pre-tax and withdrawals are taxed as ordinary income. Contributions to the Roth TSP are made after-tax and qualified withdrawals are tax-free. The right balance between traditional and Roth depends on your current tax rate, expected tax rate in retirement, and other income sources. Some federal employees benefit from Roth conversions before Required Minimum Distributions begin.
Beneficiary considerations
Your TSP beneficiary designation determines who receives your account balance if you die. It is important to keep your beneficiary designation current and to understand how TSP assets pass to beneficiaries — which may differ from how IRA assets are handled. Beneficiary designations on file with the TSP supersede instructions in a will.
Required Minimum Distributions
Federal law requires that you begin taking minimum distributions from your traditional TSP (and traditional IRA) starting at age 73. The amount is calculated based on your account balance and life expectancy. Failing to take RMDs results in significant tax penalties. Planning for RMDs — including the potential impact on your tax bracket — is an important part of retirement income planning.
Investment allocation near retirement
How your TSP is invested should generally reflect your time horizon, income needs, and risk tolerance. Many federal employees shift toward more conservative allocations as retirement approaches. The TSP's Lifecycle (L) Funds automatically adjust allocation over time, but they may not be appropriate for every investor's situation. There is no universally correct allocation — the right approach depends on your full financial picture.
Talk through your TSP decisions.
A complimentary TSP Retirement Review can help you think through the specific decisions that apply to your situation — without obligation.
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