TSP Rollover to IRA 2026: Costs, Rules and What Leavers Do

What the TSP charges, fund by fund

The TSP splits its costs into administrative expenses (recordkeeping, participant services, mailings) and investment expenses (the fees paid to outside managers). Forfeitures of agency automatic 1% contributions from FERS and BRS participants who leave before vesting pay part of the administrative cost first; what remains is the net administrative expense. The total expense ratio is net administrative plus investment. The TSP says everyone in the same fund pays the same percentage “regardless of account size”.

Source: tsp.gov Expenses and fees page, 2025 table, read November 11, 2026; the page lists all L Funds (L 2035, 2045, 2055, 2060, 2065 and 2070 are in the download). The Lifecycle Funds have no separate expenses: their ratios reflect the underlying G, F, C, S and I Funds.

The Board series behind these numbers is in the FRTIB's January 27, 2026 review of 2025 administrative expenses. The net administrative expense ratio was 4.3, 5.8, 4.8, 3.6 and 3.4 basis points for 2021 through 2025, and the gross ratio was 5.3, 6.8, 5.5, 4.3 and 4.3. In 2025 gross administrative expenses were $432 million, net were $341 million, and average net assets across all funds were $1,006 billion; $341 million over $1,006 billion is 0.0339%, matching the 3.4 basis points (our arithmetic). The minutes of the same meeting put it as “34 cents for every 1,000 dollars invested”.

One number that looks different is not. At the August 25, 2026 Board meeting the Chief Financial Officer said the expense ratio in fiscal year 2025 was 0.05 percent, “an average annual cost of 69 dollars per participant account”. That is a fiscal-year, budget-basis figure; the 0.034% to 0.051% figures above are the calendar-year 2025 ratios the TSP charged each fund.

The same $500,000 in the TSP and in an IRA

The IRA side has no single price. An IRA's cost depends on the funds you hold and on any account or advisory fee, and no document gives a single IRA expense ratio. The best sourced benchmark is the Investment Company Institute's annual study: for 2025 it reported average expense ratios of 0.40% for equity mutual funds, 0.36% for bond mutual funds, 0.14% for index equity ETFs and 0.09% for index bond ETFs. These are asset-weighted fund averages; they do not include any fee charged by a firm for managing the account.

The ten-year column is the annual cost times ten on a balance held flat, with no growth, withdrawals or fee changes (our arithmetic); it is there to show scale, not to forecast. A useful rule from the same arithmetic: every 0.10% of expense ratio is $500 a year on $500,000. The TSP's own page says its expenses are “lower than 99% of investment options”, and that as of January 2026 fewer than 1% of roughly 170,000 funds on FactSet reported expenses below the TSP's average 2025 total expense ratio. An IRA can hold funds that cost far less than the ICI averages above, and a bigger gap opens if an account also carries an advisory fee that is not in these ratios; the documents we read do not put a number on that, so the table stops at the fund level.

What a separated participant can do with a TSP account

The TSP's “Withdrawals in retirement” page says: “You can keep money in your TSP account as long as you want to.” You can keep the account after you separate from federal service “as long as you have a vested balance of $200 or more”. Contributions stop, but you can still change your investment mix and move eligible money in.

These options come from the TSP Modernization Act of 2017, signed November 17, 2017. The TSP's announcement said it eliminated the prohibition on multiple post-separation withdrawals, let separated participants over 70½ stay in the TSP without making a withdrawal election on the entire balance, and let participants “stop monthly payments, change payment frequency, or elect to purchase an annuity while receiving monthly payments”. The TSP announced on September 15, 2019 that all participants had the new options.

Two choices are one-way. A total distribution closes the account to new money from other plans. An annuity purchase cannot be undone: once bought, the TSP says the annuity is no longer part of your account.

Penalty tax, rollovers and RMDs: what changes at the IRA line

The 10% additional tax. The TSP booklet on tax rules says the 10% additional tax before 59½ “generally does not apply” to payments made after you separate from service during or after the year you reach age 55, and, for a public safety employee as defined in section 72(t)(10)(B)(ii), after you separate during or after the year you reach age 50 or have 25 years of service under the TSP. The IRS's own table of exceptions marks separation from service as available in a qualified plan and not in an IRA, and its footnote names the TSP as a governmental plan that qualifies for the age 50 public-safety version. The statute is one sentence: “Subparagraphs (A)(v) and (C) of paragraph (2) shall not apply to distributions from an individual retirement plan.” Our guides on the rule of 55 and on 401(k) rollovers to an IRA work through the same point for other plans. The exception requires separation in or after the calendar year of age 55 (or 50), not on the birthday, and a rollover happens only if you request one: money left in the TSP keeps the TSP rule.

Rollover mechanics. The TSP says the plan or IRA that receives a rollover determines “your investment options, fees, and rights to payment”. A direct rollover of the traditional balance to a traditional IRA is not taxed; a payment made to you is subject to the 20% withholding rule and a 60-day clock. A traditional balance rolled to a Roth IRA is taxable that year. Installments expected to last 10 years or more, and life-expectancy installments, cannot be rolled over, and neither can RMDs.

Required minimum distributions. The TSP computes RMDs from your traditional balance only: the RMD age is 73 if you were born before 1960 and 75 if you were born in 1960 or later, and the first RMD is due by April 1 of the year after you turn that age and have left federal service. The booklet says the TSP will make sure you satisfy the RMD, and that a missed RMD can carry a 25% excise tax (10% if corrected under section 4974(e)). Roth money is different: the statute provides that the lifetime distribution rule “shall not apply to any designated Roth account” (26 U.S.C. 402A(d)(5)), and the TSP says Roth money in your account “isn't subject to RMDs”. Beneficiary participant accounts are the exception: their RMDs include the Roth balance. For the divisors, see our uniform lifetime table for 2026; for converting inside the plan, see our guide to TSP Roth in-plan conversions.

What the FRTIB says people actually do

The FRTIB's Board packets are the only public record of what separated participants do. The Board does not publish a count or a dollar total of transfers out to IRAs that we could read as numbers: the monthly Participant Activity charts on post-separation withdrawals and total distributions (cash and transfers) are chart images in the May 28, 2026 report, and the text layer carries no values. What the Board does publish as numbers is a survey.

The Full Withdrawal Exit Survey, presented to the Board on January 27, 2026, covers participants who took a full withdrawal in 2025 and had an email on file. The agency says about 22,000 surveys went out each month, with about 1,200 responses a month and a response rate of about 5.7%; it describes the survey as reaching about 90% of people who took full withdrawals. The results are self-reported by respondents, and the FRTIB itself flags small samples for some subgroups.

Respondents could pick more than one answer, so the rows do not add to 100%. Among people who transferred to an IRA or another plan, the single main reason was:

The slide says of the consolidators that “almost half said a financial advisor suggested doing so”, and the minutes say “Very few respondents cited dissatisfaction with the TSP as a reason for transferring out of the TSP.” We read the values in label order from the slide text; the printed percentages sum to 101% because of rounding.

Among people who took cash, the main reasons were living expenses (39%), paying down debt (18%) and a home purchase or mortgage (10%), and 7% said they thought they had to withdraw their account after separating. The minutes record the FRTIB's reading: the share is lower in some groups than the year before “reflecting the Agency's increased communications clarifying that participants may keep their TSP accounts after separation”.

For scale, the same May 28, 2026 report counted 7,316,024 TSP accounts in April 2026, with an average FERS balance of $226,251 across 4,134,097 FERS accounts and $183,819 across CSRS accounts. A $500,000 balance is more than twice the FERS average.

What stays behind and what you can bring in

• The G Fund. The TSP says the G Fund “is invested in U.S. Treasury securities specially issued to the TSP”, and its page on TSP funds says only TSP participants can invest in them. Whatever a reader thinks of it, the G Fund as the TSP offers it exists only inside the account.
• Rollovers in. The TSP accepts direct and indirect rollovers of tax-deferred money from traditional IRAs, SIMPLE IRAs and employer plans into the traditional balance, and direct rollovers of Roth 401(k), 403(b) and 457(b) money. It does not accept rollovers from a Roth IRA. So an IRA can be rolled into the TSP later, even after retirement, but a Roth IRA cannot.
• Mutual fund window. The TSP offers outside mutual funds through a window: the first transfer must be at least $10,000 and no more than 25% of your TSP savings, you need at least $40,000 in the account, and you pay $37 administrative plus $95 maintenance a year ($132 withdrawn on the first transfer) and $28.75 per trade, on top of each fund's own expenses. On the maximum 25% of $500,000, $125,000, the $132 is 0.106% (our arithmetic).
• Annuities. A TSP annuity is bought through an outside vendor with no commissions, minimum $3,500; installments keep control of the money but run only as long as there is a balance.

What a reader can do with this

• Price the two sides on your own balance. Use the 2025 ratio of the funds you hold (0.034% to 0.051%) and the expense ratios, plus any account or advisory fee, printed in the prospectus and fee schedule of what you would hold outside; the difference times your balance is the yearly gap. Each 0.10% is $1,000 a year on $1,000,000.
• If you are 55 to 59½, check the penalty exception first. Separating in or after the year you turn 55 (age 50 or 25 years of service for qualifying public safety employees) opens penalty-free TSP withdrawals, and an IRA does not offer that exception. Money you might need before 59½ is where this matters.
• Take the dated decisions in order. A rollover is a request you make; leaving the account untouched needs no form. Withdrawals cannot be reversed once processed, and requests made before noon Eastern are processed that night, so the cancel window is short.
• Check what you would give up. A total distribution ends your ability to move money into the TSP; an annuity purchase ends your control of that money; the mutual fund window carries fixed fees.
• Mind RMD age and Roth. Born before 1960, RMDs start at 73; born 1960 or later, at 75, on the traditional balance only.

More for federal retirees, read from the same kind of primary documents: the 2027 FERS and CSRS COLA by retirement month, FEHB and PSHB 2027 premiums, plan by plan, FEGLI Option B premiums after 65, the FERS supplement's 2027 earnings limit, FLTCIP premium increases since 2010, OPM's retirement backlog, month by month and the TSP L Funds' allocations and glide paths.

FAQ

Sources, read and saved on November 11, 2026: tsp.gov pages Expenses and fees, Withdrawals in retirement, Move money into the TSP, Mutual fund window, G Fund and fund pages, and plan news of November 20, 2017 and September 15, 2019; TSP booklets TSPBK26 (Tax Rules about TSP Payments, 10/2026) and TSPBK35 (7/2026); FRTIB Board slides “TSP Annual Review: Administrative Expenses for 2025” and “Full Withdrawal Exit Survey Results” (both January 27, 2026), the Office of Participant Experience report of May 28, 2026, and Board minutes of January 27, May 28, August 25 and September 22, 2026; Investment Company Institute, “Trends in the Expenses and Fees of Funds, 2025” (news release of March 25, 2026, read through a web extraction because ici.org blocks direct downloads); IRS Topic no. 558 and the IRS table of exceptions to the early-distribution tax; 26 U.S.C. 72 and 402A. Dollar examples and the ten-year column are our arithmetic.