TSP After You Separate Explained

Your Thrift Savings Plan balance is yours when you leave, including the service's matching contributions once vested. What stops is the contributing: no more of your pay goes in, and no more match comes with it.

You have four broad choices:

  • Leave it in the TSP. You keep the TSP's institutional fee levels, which are among the lowest available anywhere. You can still move money between funds; you just cannot add to it from military pay.
  • Roll it into a new employer's 401(k). Consolidates your accounts, subject to that plan accepting rollovers.
  • Roll it into an IRA. More investment choice, usually higher fees.
  • Withdraw it. Available, and usually the worst option — income tax plus, generally, a 10% early withdrawal penalty before age 59½.

The fee point is the one people underweight. TSP expense ratios are low enough that "leave it where it is" is a genuinely competitive default rather than a lazy one.

If you have both traditional and Roth balances, they are treated differently on rollover and withdrawal, so check which you hold before moving anything.

Who is eligible?

Anyone with a TSP balance on separation, which is everyone under BRS who contributed and most people under legacy who chose to.

Vesting matters for one piece only: the service's automatic 1% contribution requires two years of service. Matching contributions vest immediately, and your own contributions are always yours.

If you take federal civilian employment later, your TSP follows you — the same account continues, and a federal employer can contribute to it again. That is a reason not to roll it out if federal service is a possibility.

How do I apply?

  • Decide before you separate, not after: Contact details and mailing addresses change, and a lost TSP account is tediously hard to reconnect with.
  • Compare fees before rolling out: TSP expense ratios are very low. An IRA with more choice can easily cost more in fees than it adds in return.
  • Do not cash it out: Income tax plus a 10% penalty before 59½ makes this the most expensive option available.
  • Check whether you hold traditional, Roth or both: They roll over and withdraw differently.
  • Keep it if federal employment is possible: The same account continues into a federal civilian job, and can receive contributions again.
  • Update your beneficiary designation: It does not update itself on separation, marriage or divorce.

Common questions

What happens to your TSP when you leave the military?

The balance stays yours, including vested matching contributions. What stops is new contributions and the match.

Should you roll your TSP into an IRA?

Compare fees first. TSP expense ratios are among the lowest available, so leaving it in place is often cheaper than an IRA with more investment choice.

Can you withdraw your TSP after separating?

Yes, but it is usually the worst option — income tax plus generally a 10% early withdrawal penalty before age 59½.

Does your TSP follow you into a federal job?

Yes. The same account continues and a federal employer can contribute to it again, which is a reason not to roll it out if that is a possibility.

When do TSP contributions vest?

Your own contributions and the service match are yours immediately. The automatic 1% requires two years of service.

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