Thrift Savings Plan

Submitted by Julie Brangenberg on Tue, 2020-02-25 18:59

Hello. I was talking with a couple of post office employees, almost ready to retire, who had questions about their TSP. Are there any significant advantages of TSP to 401k or IRA? Thanks.



Submitted by Alan - IRA critic on Tue, 2020-02-25 19:45

  • The TSP has some advantages and disadvantages. Advantages include the G fund, the ability to roll other accounts into the TSP even after retirement from the govt (for example to facilitate back door Roths), and better creditor protection for residents in some states (even though the TSP is not subject to ERISA).
  • Disadvantages – while low cost, the number of investment options is limited. Distribution options have improved, but still are limited compared to IRAs. TSP does not offer in plan Roth rollovers (conversions). IT also does not allow RMD aggregation between the pre tax and Roth accounts, nor will it use Table II for RMDs when spousal beneficiary is more than 10 years younger. Probably the most serious disadvantage is that any beneficiary of a non spouse beneficiary is subject to a lump sum distribution, and a non spouse beneficiary cannot maintain an inherited TSP and must promptly roll it over to an inherited IRA or face a lump sum distribution. 
  • That said, the TSP is not subject to the post death restrictions of the Secure Act for 2 more years, ie. for deaths after 12/31/2021.

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