rolling over TSP account?

When I leave the military, will I be able to roll my TSP account into a 401K, or will it have to be an IRA? Thanks.

It depnds on the receiving plan. Some 401ks allow transfers from outside retirement plans, other do not. This option would be discussed in the Summary Plan Document of the new 401k.

However, for the flexibility and control factor alone, I would opt for an IRA regardless. You can use an IRA for college funding and a first time home purchase as long as it has been open for at least 5 years. Also, you can choose where you want to invest the money.

In dire times, the most you would be able to get out of a 401k is 50% if you take a loan against it. And then, if you are terminated the loan becomes due immediately. Even though you would charged a penalty on a non-qualified distribution from an IRA, at least you would have access to the full amount.

Good advice!


In dire times, the most you would be able to get out of a 401k is 50% if you take a loan against it. And then, if you are terminated the loan becomes due immediately. Even though you would charged a penalty on a non-qualified distribution from an IRA, at least you would have access to the full amount.

Income Tax would be due for the distribution from either the 401k or IRA.
If under age 59.5 years, you would also be charged a penalty on the 401k loan balance at the time of your termincation.

You can transfer your TSP to a ROTH IRA. The down side to this is that the entire TSP balance would be taxed. Another idea would be to transfer from the TSP to a Traditional IRA, and then convert enough of your TIRA to fill your tax bracket. This will give you a smaller tax hit. You can repeat this each year.

This is Kevin McCormally of Kiplinger with a tiny bit of good news.

The 10% early distribution penalty for a TSP or 401(k) disappears in the year you reach age 55, not 59 1/2, as applies to the IRA. If you turn 55 or older in the year you leave (or lose) your job, there is no penalty...although the tax bill still applies.

Mccormally,

Thanks for the reminder...