TSP Rollover to IRA: The Complete 2026 Guide for Federal Employees

After leaving federal service, you face a decision most federal employees never discuss in detail: what to do with your Thrift Savings Plan balance. The default — leaving it in the TSP — is often the worst choice for people who need retirement income beyond Social Security and their FERS pension.

A TSP-to-IRA rollover lets you move your TSP funds into an IRA after leaving federal employment, unlocking access to commercial annuities (SPIA), dividend-growth portfolios, municipal bonds, and estate planning structures that the TSP doesn't offer. The critical decision is whether to convert to Roth (pay tax now, tax-free growth and withdrawals) or keep as traditional IRA (tax-deferred, taxed at withdrawal).

The best choice depends on three factors: your current tax bracket, years until retirement, and whether you need the IRS backdoor Roth strategy as a high-income earner.

This guide covers rollover mechanics, the Roth conversion decision framework, specific MetLife SPIA payout data, and how TSP rollovers compare to commercial annuities — the same comparison RetireStack's TSP Annuity Rates page makes using live carrier data.

Direct Answer: Should You Roll Over Your TSP to an IRA?

Most federal employees with a TSP balance above $200,000 and at least 10 years until retirement should consider a TSP-to-IRA rollover — with one major caveat: evaluate the Roth conversion question before rolling.

Here's why. The TSP is excellent for accumulation — rock-bottom expense ratios (0.05% for the C and S funds), institutional-grade investments, and a G Fund guarantee. But for retirement income, the TSP's options are limited: you can take systematic withdrawals (inflexible), purchase a TSP annuity (MetLife currently pays ~3.5% on balances under $500K), or self-manage a drawdown strategy that the TSP wasn't designed for.

An IRA rollover gives you access to:

• SPIA (Single Premium Immediate Annuity): Commercial carriers like Pacific Life, Symetra, and New York Life are currently paying 5.5–6.5% on $400K balances — vs. MetLife's ~3.5% through the TSP
• Dividend-growth portfolios: ETF-based income portfolios yielding 3–4% with growing payouts
• Municipal bonds: Tax-free income for retirees in high tax brackets
• Estate planning: Inherited IRA stretch rules, charitable remainder trusts, QLACs

The caveat: if you're in a high tax bracket now and expect lower taxes in retirement, a Roth conversion before rolling over means paying taxes on a smaller balance (pre-conversion) rather than a larger one (post-growth). And if you plan to leave your TSP to heirs, the SECURE Act 2.0's 10-year rule for non-spouse beneficiaries makes IRA stretch planning more important than ever.

TSP Rollover Mechanics: Direct vs. Indirect

When you leave federal service, you have several options for your TSP balance:

Option 1: Leave it in the TSP (default) The TSP remains accessible. You can make interfund transfers, change contribution allocations, and take withdrawals. The G Fund continues to pay its unique ~4.5% guaranteed return. You can also purchase a TSP annuity (MetLife-administered). No time limit on keeping the balance.

Option 2: Direct rollover to IRA The TSP sends a check made out to your IRA custodian (Fidelity, Schwab, Vanguard, etc.). You never touch the money — it goes directly from TSP to IRA. No taxes withheld. This is the cleanest option.

Option 3: Indirect rollover (60-day rollover) The TSP sends a check made out to YOU. You have 60 days to deposit the full amount (minus withholdings — typically 20%) into an IRA. If you miss the 60-day window, the distribution is taxable. If you don't deposit the full amount, the difference is taxable AND may be subject to the 10% early withdrawal penalty if you're under 59½.

Option 4: Direct rollover to another employer's 401(k) If you're going to work for another employer with a 401(k) plan, you can roll TSP directly into that plan. Useful if the new employer's plan has unique fund options or loan provisions.

The recommendation: always use a direct rollover. Indirect rollovers create tax complexity and timing pressure. Your IRA custodian can arrange a trustee-to-trustee transfer in 3–7 business days with no tax consequence.

The Roth Conversion Decision: Key Variables

The TSP-to-IRA rollover has a critical sub-decision: traditional TSP → traditional IRA vs. traditional TSP → Roth IRA conversion.

The math on Roth vs. Traditional

If you expect to be in a higher tax bracket in retirement (rare, but possible for high-income earners, business owners with exit proceeds, or those with significant non-TSP income): → Convert to Roth now. Pay tax at your current rate. Withdraw tax-free forever.

If you expect to be in the same or lower tax bracket: → Roll to traditional IRA. Defer taxes. Withdraw at your future rate.

If you're in the 22%–24% bracket now, expect 24%+ in retirement, and have 15+ years of tax-deferred growth: → Partial Roth conversion makes sense. Convert enough to fill the 24% bracket each year, let the rest grow tax-deferred.

TSP-Specific Roth Considerations

The TSP accepts Roth contributions separately from traditional contributions. If you're still employed by the federal government, you can continue contributing to Roth TSP while leaving your existing traditional balance to grow. When you eventually roll over, the traditional and Roth portions roll over separately — the traditional goes to a traditional IRA, the Roth goes to a Roth IRA.

The Backdoor Roth Implication

Once your TSP balance is in an IRA, you cannot make "backdoor Roth" contributions (non-deductible traditional IRA contribution converted to Roth) if you have any other pre-tax IRA balances — including SEP-IRAs, SIMPLE IRAs, or the traditional portion of the rollover. The pro-rata rule forces you to convert a percentage of all IRAs, creating an unexpected tax bill.

If you may need backdoor Roth contributions in the future, consider rolling the TSP directly into a 401(k) at your next employer (if the plan accepts rollovers) rather than an IRA. 401(k)s don't affect the backdoor Roth calculation.

Commercial SPIA vs. TSP Annuity: The Rate Comparison

The TSP annuity is administered by MetLife and currently pays approximately 3.0–3.5% annual return on balances under $500,000 (as of 2026). Commercial carriers are paying 5.5–6.5% on equivalent balances.

Source for commercial rates: Blueprint Income quote engine, updated monthly. As of mid-2026, top-rated carriers (Pacific Life, Symetra, Principal, New York Life) are paying 5.75–6.25% for 65-year-old male annuitants. Rates vary by carrier, age, sex, and payment structure.

The TSP annuity does have one advantage: it includes a death benefit that returns the remaining balance to your beneficiary. Most commercial SPIAs do not include a death benefit (unless you add a "cash refund" rider, which reduces the monthly payment by 10–15%).

The RetireStack recommendation: For couples where one spouse needs guaranteed income and the other has sufficient other assets, a commercial SPIA with a 10-year certain period (ensures at least 10 years of payments even if the annuitant dies) at ~5.8–6.2% currently beats the TSP annuity on every income metric.

Rollover Checklist Before You Act

Before initiating a TSP rollover, verify:

• Estimate your income needs: FERS pension (if vested) + Social Security estimate (ssa.gov) + any other income = your baseline. Is the TSP balance your discretionary layer or your essential layer?
• Know your tax bracket now: Rolling to a Roth IRA in the 32%+ bracket is almost never optimal unless you have specific estate planning goals
• Check your new employer's 401(k): If you're going to a new federal or government position, keeping TSP might be better than rolling to an IRA (FERS transfer rules differ)
• Review TSP withdrawal rules: You can take distributions from TSP at 59½ (or 55 if separating from federal service). Rollover doesn't change these rules
• Evaluate spousal rules: If married, your spouse may have rights to the TSP balance — confirm with a domestic relations order if relevant
• Consider QLAC: A Qualified Longevity Annuity Contract (QLAC) can be purchased within an IRA with up to $200,000 (2026 limit) — deferring RMDs and providing guaranteed income for life

What Happens to Your TSP After Rollover

After a direct rollover to a traditional IRA:

• The balance appears in your IRA at your chosen custodian (Fidelity, Schwab, Vanguard, etc.)
• You control all investment decisions — TSP's limited fund lineup (G, F, C, S, I,Lifecycle) is replaced by thousands of options
• RMDs (Required Minimum Distributions) begin at age 73 (for 2026 and later) — but a QLAC can defer RMDs on the portion used to purchase it
• Estate planning: IRA beneficiary designations control distribution after death; inherited IRAs have new 10-year distribution rules under SECURE Act 2.0

After a Roth rollover:

• The balance goes to a Roth IRA at your custodian
• Qualified withdrawals are tax-free
• No RMDs during your lifetime
• 5-year rule applies to converted amounts (converted funds are treated as separate from contributions)
• Heirs inherit the Roth IRA and must withdraw within 10 years — income tax-free

Frequently Asked Questions

When can I roll over my TSP after leaving federal service? You can roll over your TSP balance at any time after separating from federal service. There is no mandatory distribution age for TSP (unlike IRAs which require RMDs at 73). You can keep the TSP indefinitely if you prefer its institutional fund options.

Will I owe taxes on a TSP rollover? A direct rollover (trustee-to-trustee) from traditional TSP to traditional IRA is not taxable. An indirect rollover has 20% federal withholding — you must deposit the full amount (including the withheld amount you don't receive) within 60 days to avoid taxes and penalties. Rolling TSP to a Roth IRA is taxable in the year of conversion — you're converting pre-tax dollars to post-tax dollars.

What is the best IRA custodian for a TSP rollover? Fidelity, Schwab, and Vanguard all offer TSP rollover services with no account fees, extensive fund lineups, and strong customer service. Fidelity and Schwab have the most robust annuity search tools. Vanguard is best for buy-and-hold investors who want index funds. All three can handle a direct rollover from TSP.

Should I roll TSP to IRA or leave it in TSP? Leave TSP in if: you're in a low tax bracket, plan to use TSP's G Fund for stable income, or may return to federal service. Roll to IRA if: you need guaranteed income beyond what TSP offers, want access to commercial SPIA rates (currently 5.5–6.5% vs. TSP's ~3.5%), or need estate planning flexibility that IRA beneficiary designations provide.

What about the TSP's special G Fund — isn't that better than anything in an IRA? The G Fund earns ~4.5% currently with government guarantee — it's the best risk-free return available. If you keep your TSP balance above $200K and use it primarily for stable income, the G Fund is worth keeping. However, once you need income that requires more than the G Fund can provide (or want access to commercial annuity rates), rolling over makes sense. A common strategy: keep $200K in TSP for the G Fund, roll the rest to IRA for income diversification.