Should you roll your TSP to an IRA?

1. The decision at retirement

When you separate from federal service, your TSP doesn’t force you out — you can leave it right where it is, draw income from it, or move it to an IRA. The pitch to roll over is constant, and advisors who manage IRAs have an obvious interest in it. That doesn’t make rolling wrong; it just means you should weigh the trade yourself rather than accept the default.

The honest framing: the TSP is an exceptional accumulation vehicle and a very good distribution vehicle, but it’s deliberately simple. An IRA is more flexible and more expensive. Whether that trade favors you depends on what you actually need in retirement — and most of this guide is about making that comparison concrete.

2. The case for keeping the TSP

Four real advantages keep money in the TSP:

• Rock-bottom fees. TSP expense ratios have hovered around 0.05% — roughly $5 a year per $10,000. Few IRA line-ups beat it across the board, and fees compound relentlessly (section 4).
• The G Fund. A no-loss government security with intermediate-Treasury-like yields and no equivalent outside the federal system. You simply can’t buy it in an IRA.
• Simplicity. A handful of well-built funds, automatic RMD handling, and no temptation to over-tinker. For many retirees, that’s a feature.
• Creditor protection. The TSP carries strong federal protections in lawsuits and bankruptcy; IRA protection varies by state. Not a sole reason to stay, but a real one.

3. The case for rolling to an IRA

The IRA earns its higher cost with flexibility the TSP can’t match:

• Investment choice. The TSP offers five core funds plus lifecycle funds and a (fee-bearing) mutual-fund window. An IRA opens essentially the entire market — thousands of funds, ETFs, and individual securities.
• Qualified charitable distributions. QCDs let those 70½+ give directly from a traditional IRA, satisfying RMDs tax-free. The TSP doesn’t allow QCDs — a frequent reason charitably-minded retirees roll out.
• Flexible withdrawals. TSP withdrawals come out proportionally across your funds; an IRA lets you choose which holdings to sell — valuable for managing taxes and market timing in retirement.
• Estate planning. IRA beneficiary rules are more flexible than the TSP’s beneficiary-participant-account rules, which can force a successor heir to realize the whole balance as taxable income in one year.

4. The fee gap

The single most underappreciated factor is cost, because small percentages compound into large dollars. The TSP’s ~0.05% versus a typical IRA fund line-up around 0.40% looks trivial — until you run it on a real balance over a real retirement:

That’s a $1,750 difference every year, or roughly $17,500 over a decade — and that ignores the compounding drag on growth, which makes the real gap larger. None of this means “never roll”; it means the IRA’s added value — choice, QCDs, control — has to be worth more than this cost. The calculator next lets you test your own numbers.

5. What higher fees cost you

Enter your balance, an expected return, a time horizon, and the two expense ratios. The calculator grows the same money under each fee level and shows the gap — the true cost of paying for the IRA’s flexibility, assuming identical investments.

6. The G Fund question

If one feature single-handedly keeps money in the TSP, it’s the G Fund. It invests in special-issue government securities that pay interest tied to intermediate-term Treasury yields but can never lose principal value. That pairing — meaningful yield with zero market risk — doesn’t exist in the open market. You can buy Treasuries, CDs, or bond funds in an IRA, but bond funds fluctuate with rates and individual bonds tie up your money to maturity.

For a retiree who wants a stable, no-drama anchor for the conservative slice of their portfolio, the G Fund is genuinely irreplaceable. That’s exactly why the partial rollover is so popular: keep enough in the TSP to hold the G Fund, and roll the growth-and-flexibility portion to an IRA. You don’t have to choose all or nothing.

7. The 2026 in-plan conversion wrinkle

One classic reason to roll out has weakened. In the past, feds who wanted to convert traditional money to Roth had to roll to an IRA first. As of January 28, 2026, the TSP added an in-plan Roth conversion option — you can convert traditional TSP balances to Roth TSP directly inside the account, no rollout required.

Combined with the 2024 change that made Roth TSP exempt from lifetime RMDs, two of the historical “roll out to an IRA” motives — converting to Roth and escaping Roth RMDs — can now be handled inside the TSP. That doesn’t eliminate the IRA’s other advantages, but it does mean a Roth conversion goal alone is no longer an automatic reason to leave. Note that an in-plan conversion is still a taxable event in the year you do it, just like any conversion.

8. How to do it right

If you decide to roll — in full or in part — a few rules protect you. Always use a direct, trustee-to-trustee rollover; if a check is instead sent to you (an indirect rollover), the TSP withholds 20% for taxes, and you must replace that 20% from other funds within 60 days or it’s treated as a taxable distribution. Keep the tax character matched — traditional TSP to a traditional IRA, Roth TSP to a Roth IRA — so the move itself stays tax-free.

Remember that rolling over doesn’t change the underlying rules: the 10% early-withdrawal penalty still applies before 59½ (with exceptions), and RMDs still come due. For the step-by-step mechanics — forms, timing, and how partial transfers work — see TSP rollovers, and fold the decision into your broader withdrawal plan rather than treating it as a standalone move.

9. Frequently asked questions