TSP Transfers and Rollovers:
How, When, and Why (or Why Not!)
Presented by:
Federal Retirement Thrift Investment
Board
March 2015
Transfers and Rollovers
• Transfer (aka direct rollover)
– Money moves directly from one account or
retirement plan to the other
• Rollover (aka 60-day or indirect rollover)
– You must complete the transaction within 60 days
– May result in taxes, withholdings, and/or
penaltie
s if not properly executed
See instructions on Forms TSP-60 and/or TSP-60-R for more information
IRAs and “Plans”
• IRAs – Individual Retirement Accounts (or Individual
Retirement Arrangements), including:
– Traditional
– Roth
– SIMPLE
• Plans – eligible employer plans, including:
– TSP
– 401(k)
– Profit-sharing plans
– 403(b) plans
– 457(b) plans
When can I make a transfer or rollover?
• The TSP can accept inbound rollovers
and
transfers any time, as long as your account is
open and has a balance greater than $0.00
• The TSP can only make outbound transfer
s as
part of certain withdrawals (see the Tax
Notice, TSP-536, Important Tax Information
About Payments From Your TSP Account, for
more information)
More on Eligible Rollover Distributions
Inbound Transfers
and Rollovers
Note: Cannot transfer/rollover Roth, Education and Inherited IRA into the TSP
TSP-60
TSP-60
Traditional
TSP Balance
TSP-60R
Roth TSP
Balance*
*Transfers only - TSP cannot accept Roth rollovers
Outbound Transfers
and Rollovers
Note: Cannot transfer/rollover Roth, Education and Inherited IRA into the TSP
Employer plan (pre-tax)
Traditional IRA
Roth IRA
Traditional
TSP Balance
Roth TSP
Balance
Employer plan (Roth acct)*
Roth IRA
*Transfers only – rollovers not permitted to
designated Roth accounts in employer plans
Outbound Transfers
Choice of Tax Regimes
Deferred taxes
No withholding
No penalty
Traditional TSP
Traditional IRA or employer plan
Roth TSP
Deferred taxes
(if applicable)
No withholding
No penalty
Roth IRA or employer plan*
*Note: money from your traditional TSP balance may be transferred to a Roth IRA, but not to the
Roth balance of an employer plan
Requesting an Inbound Transfer or
Rollover
10
20
70
X
X
Requesting An Outbound Transfer
Withdrawal Wizard
What should I consider?
• Investment Options
• Fees and Expenses
• Services
• Early Withdrawal Penalty
• Required Minimum Distributions
What’s the bottom line?
• Different types of accounts can differ in
unexpected ways
• The destination account determines what
rules, c
osts, and restrictions will apply to your
money
• Take a careful, holistic look at all your options
befor
e you leap
Investment Options
• IRAs
– Might offer more investment options than a plan
• Plans (including TSP)
– May be able to offer lower cost (“institutional”) share
classes
– Investment menus are selected and monitored by
plan fiduciar
ies
• TSP
– Offers 5 low-cost, passively managed funds
•
What
It
Is
:
A fund containing
stocks
of
large and
medium-sized
U.S.
companies
II
Benc
h
mark
Index
:
Standard & Poor's
500 Stock Index
£.
Potential for high
investment returns
over the long
te
rm
v Can
be
volatile
depending on stock
market performance
•
What
It
Is
:
•
What
It
Is:
•
What
It
Is
:
•
What
It
Is
:
A fund containing A fund containing
A fund containing A fund containing
stocks
of
small
to
international stocks
Government, Government securities
medium-sized from more than
20
corporate, and
that
are specially
U.S.
companies developed countries
asset-backed bonds
issued
to
the
TSP
II
Benchmark
Index
:
II
Benchmark
Index:
II
Benchmark
Index
:
Dow Jones
U.S.
Morgan Stanley
Barclays Capital
U.S.
£.
Does
not
lose money;
Completion
TSM
Index
Capital International
Aggregate Bond Index
has a consistent
EAFE
Stock Index
but
relatively low
£.
May earn returns
that
investment return
£.
Potential
for
high
£.
Potential
for
high are higher than money
investment returns
investment returns
market funds over
v Your money may
not
over the long
term
over
the
long term
the long term with
grow
enough
to
meet
relatively low risk
your
re
tirement needs
v
Can
be
volatile v
Can
be
volatile v Bond prices fall when
or
outpace inflation.
depending on stock
depending on stock interest rates rise. Bonds
market performance market performance.
may
be
repaid early,
Returns also
depend
reducing your returns.
on the value
of
the
U.S.
dollar.
TSP & Diversification
“The five core [TSP] investment alternatives
span the risk/return spectrum and include what
we would consider to be all of the core building
blocks to build a diversified investment
portfolio.”
Hewitt Ennis Knupp, Investment Option Review, February 2013
Fees and Expenses
• Investment-related expenses may include
– Sales loads
– Commissions
– Mut
ual fund expenses
– Invest
ment advisory fees
• IRA account fees may include
– Administrative, account set-up and custodial fees
• Plan fees typically include
– Plan administrative fees (e.g., recordkeeping, compliance, trustee
fees)
– Fees for services such as access to a customer service repr
esentative
• TSP administrative expenses are reflected in daily share prices
– Plan loans incur a separate transaction fee
Tracking the TSP Investment Funds
Services
• IRA providers offer different levels of service, which may include
– Brokerage services
– Investment advice
• TSP provides access to
– Planning tools
– Telephone help l
ine (the ThriftLine)
– Educational mat
erials and workshops
– Professionally designed portfolios (the Lifecycle Funds)
– Income options
• Monthly payments
• Lifetime annuity payments
• Supplemental payments to satisfy Required Minimum Distributions
Contacting TSP
TSP Services
Assistance and Education
On the phone
In print
877-968-3778
The TSP ThriftLine
On the web
In your workplace
TSP Services
The Lifecycle Funds
Expected Risk
High Low
High
Low
Expected
Retur
n
L2020
L2040
L2050
L Income
L2030
G
74%
G
42%
C
28%
G
28%
C
35%
G
19%
I
22%
I
19%
S
18%
I
26%
C
42%
C
38%
I
16%
S
16%
S
13%
TSP Services
Retirement Income Options
• TSP is designed to be an asset for life
• TSP income options provide a “retirement paycheck” to get
you through, not just to retirement
– Deferred income: You can do nothing at all and let your savings
compound until you’re ready to start receiving income
– Flexible income: Monthly payments allow you to retain control of the
account a
nd make your own investment decisions
– Lifetime income: Life annuities provide actuarially determined
paymen
ts for life
– Custom solutions: Mixed withdrawals let you combine the flexibility of
monthly
payments with the security of life annuity payments
More on Your Retirement Income Options
Will I be subject to a penalty if I retire early?
• IRAs
– Generally, you can’t take penalty-free withdrawals from an
IRA until age 59½
– Withdrawals for a few specific purposes are excepted
• Plans (including TSP)
– If you leave your employer between ages 55 and 59½, you
may be able to take penalty-free withdrawals from that
employer’s plan
• TSP life annuity payments and monthly payments
computed by TSP are penalty-free regardless of your
age
What are the rules for RMDs?
• IRAs
– Generally, you must begin receiving RMDs from your IRAs after
turning 70½, regardless of whether you continue working
– Roth IRAs are not subject to the required minimum distribution
rules
• Plans (including TSP)
– Roth balances in a plan are subject to the required minimum
distribution rules
– If you are still working at age 70½, you
generally are not
required to receive RMDs from your current employer’s plan
• The TSP income options are designed to ensure that you
receive the RMDs required by law
QUESTIONS???
