Can I Leave My Money in My Thrift Savings When I Retire?

Make a plan for your retirement money.

Making a financial plan image by Allen Stoner from

The thrift savings plan, or TSP, is a retirement program for federal employees, including members of the military services. It is similar to a traditional individual retirement account or an employer's 401(k) plan. A TSP offers investment options with low fees, and contributions during federal employment are tax-deductible. There are a number of options for TSP funds after you retire or leave federal service.

Leave Money In

You don't have to withdraw your TSP money when you retire, if you have a balance of $200 or more. You can take out part of your money if you withdraw at least $1,000. You also can roll it over into an IRA. Or you can leave the entire amount in the TSP. You can continue to make tax-deductible contributions and accumulate earnings on the balance for as long as you work for the government.

Required Minimum Withdrawals

A TSP falls under the same Internal Revenue Service requirements for age-based withdrawals as a traditional IRA, 401(k) or other tax-deferred retirement program. You have to start taking out a minimum amount, based on your account balance and your life expectancy, after you reach 70 1/2. That withdrawal must begin by April 1 of the year after you turn 70 1/2.

Tax Consequences

Money taken out as a required minimum withdrawal will be subject to federal income taxes, if it was contributed through any kind of tax-deductible plan. An exception is made for contributions made while serving in a military combat zone. Any funds contributed or rolled into a TSP through a Roth IRA are exempt from taxes, because these contributions were taxed at the time they were earned.

Withdrawal Penalties

If you retire at age 55 and take part or all of your TSP account, you will not be charged an early-withdrawal penalty. With a traditional IRA, you would be assessed a 10 percent penalty for any withdrawal before 59 1/2.