While you are working
How much, traditional or Roth, and which funds. The default for a new hire is rarely the right allocation for someone five years out, and lifecycle funds are a reasonable answer rather than an automatically correct one.
TSP guidance
What to do with the largest number on your statement. Contribution strategy while you are working, fund allocation as you approach the date, and the withdrawal options once you are out — including the ones that are irreversible.
For most federal employees the TSP is the largest number on any statement they own, and the one they have had the least guidance on. The agency explains how to contribute. Nobody explains what to do with it when you stop.
The decisions that matter
As you approach your date
Sequence-of-returns risk is not an abstraction when you are drawing down within three years. This is where allocation stops being about growth and starts being about not being forced to sell at the wrong moment.
Once you are out
Installments, annuity purchase, partial withdrawals, rollovers — each with different tax treatment, different flexibility and different consequences for your survivors. Some are reversible. Some are not.
- Review your current balance and allocation against your actual retirement date
- Model what the TSP needs to produce alongside your annuity and Social Security
- Walk through every withdrawal option with the tax treatment attached
- Flag the choices that cannot be undone before you make them
- Coordinate the TSP decision with FEGLI, survivor elections and your retirement date, because they are one decision
Common questions
Questions we answer every week
Should I roll my TSP into an IRA when I retire?
Sometimes, and the honest answer is that it depends on what you are trying to buy. The TSP’s expense ratios are among the lowest available anywhere, it offers the G Fund, which has no private-sector equivalent, and it carries federal creditor protections. An IRA offers a far wider investment range, more flexible withdrawal mechanics, and easier estate planning for non-spouse beneficiaries.
Be aware that most of the material answering this question online is written by firms that are paid when the money moves. We will tell you which way we are compensated before we discuss it.
Can I take money out of the TSP before 59½ without a penalty?
Often, yes. If you separate from federal service in or after the year you turn 55, withdrawals from the TSP are generally not subject to the 10% early withdrawal penalty. For special provisions employees — law enforcement, firefighters, air traffic controllers — that threshold is generally the year you turn 50. Note that rolling the money to an IRA first can forfeit this treatment, which is one of the reasons the rollover question is worth slowing down over.
What happens to my TSP if I die?
It passes according to your TSP beneficiary designation, which overrides your will. A spouse beneficiary can generally keep the money in a beneficiary participant account within the TSP; non-spouse beneficiaries cannot, and the tax treatment differs significantly. Designations are not updated automatically by a divorce, a remarriage or a death, which is why we check them at every review.
Traditional or Roth TSP?
The question is whether your marginal tax rate now is higher or lower than the one you expect in retirement. A federal employee at the top of their career ladder with a substantial annuity coming may well be in a similar bracket after retirement as before, which weakens the usual assumption. Many people are best served by holding some of each, so that the drawing order is a choice rather than a constraint.
How do I change my TSP allocation?
Through your account at tsp.gov. It is worth understanding the difference between an interfund transfer, which moves the balance you already hold, and a contribution allocation, which only directs new money. Changing one and assuming you have changed both is a common and costly mistake.
Talk it through with someone who only does this
A benefit review covers this alongside everything else, because in practice it is never a standalone decision.
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Related: Retirement benefit review · Retirement paperwork · FEGLI & survivor benefits