Can You Move Funds From a TSP to an IRA?
If you decide to transfer funds from a TSP into an IRA, be mindful that there may be conflicts of interest involved. Financial professionals recommending such transfers could earn commissions or fees for doing so.
Your TSP funds can be converted directly or indirectly. A direct rollover involves having the administrator transfer money directly, while with an indirect rollover you withdraw and send the funds yourself to your IRA.
Taxes
When moving funds from a TSP to an IRA, it is essential that you consider the tax implications. A direct rollover allows the TSP administrators to handle this transfer on your behalf and is often preferred because it reduces mistakes and paperwork. However, indirect rollovers are also available and involve sending you a check that must then be deposited into your new account by yourself; although these require you to be responsible for overseeing it yourself; additionally 20% must be withheld from each distribution for taxes purposes by TSP administrators.
If you decide to transfer funds from a Thrift Savings Plan (TSP) into an Individual Retirement Account (IRA), be aware of all associated fees and expenses. This may include investment expenses, plan or account fees, custodial fees and administration charges. IRA fees tend to be lower than TSP fees but this doesn’t indicate whether they’re the better buy; many financial professionals earn commissions when you transfer assets into an IRA.
Fees
Deliberating on whether to stay or rollover TSP funds is an important financial decision that warrants careful consideration. Each option offers advantages and disadvantages; remaining in the Thrift Savings Plan could be appropriate if you prefer low fees while for greater investment flexibility, an IRA could provide greater choice.
Before making your decision, it is essential that you are aware of all fees associated with an IRA account, such as mutual fund management expenses, account maintenance fees and brokerage commissions that could reduce your return over time. When making this choice, compare TSP fees against those associated with other retirement plans and IRAs – consult an advisor in order to assess and compare each option and make an informed decision – SmartAsset’s free tool matches you up with trusted financial advisers near your location who can discuss goals while helping determine what’s best suited to your specific circumstances and needs!
Distribution options
Consideration must be given to both the tax implications and fees and investment options before rolling over funds from your TSP to an IRA. There may be cost savings by shifting money out, yet fees and investment choices must also be carefully considered – TSP offers three methods of transfer: direct rollover, indirect rollover and lump sum distribution.
Direct rollovers can be straightforward but complex when moving large sums. Your TSP will send a check directly to the new plan or IRA of your choice but will withhold taxes from its distribution amount.
If you need some guidance when making financial decisions, why not work with a financial advisor? SmartAsset’s free tool connects you with pre-vetted advisors in your area so that you can schedule a call and discuss questions or goals directly. Simply enter your location and click “Find Advisors”, it only takes minutes!
Investment options
Although many advertisements encourage TSP participants to transfer their funds into an IRA, this may not always be the best decision. Before making this move, it’s essential that you conduct thorough research and understand all applicable rules.
There are two methods available to you to move TSP savings to an IRA: direct and indirect rollovers. In direct rollover, funds will be sent directly from your administrator into your new account; with indirect rollovers you receive a check and must deposit it within 60 days or else tax implications could result from taxed withdrawal.
Before moving your TSP funds to an IRA, it is advisable to speak with a financial advisor. SmartAsset’s free tool matches you with pre-screened advisors in your area who can answer any queries about rolling over TSP funds into an IRA account and assist in scheduling free introductory calls between matches so you can choose one who fits best for your situation.
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