Federal Employees TSP Rollovers | Ed Slott and Company, LLC

Federal Employees TSP Rollovers

What are the pros and cons of rolling over a Fed EE's TSP?

[quote="ryak@scrantonfinancialgro"]What are the pros and cons of rolling over a Fed EE's TSP?[/quote]Pros: You could roll it over to a custodian with a lot more options. Cons: You already have the plan with the absolute lowest expenses by far of any other plan. If you are an investor who thinks you can beat the market with active management and wide diversification, a rollover certainly gives you more options. If you are a passive investor who believes in getting the market minus expenses, there is no better place to be than TSP. TSP has the lowest expenses by far. There are certainly other factors to consider, and I am covering only one.

8) A related question: Can you convert your TSP to a Roth and still leave it in the TSP? That could potentially be a huge drawback. I personally like the idea of rolling the TSP to an IRA primarily for diversification. The TSP is only bond and stock market related. Most sophisticated investors have at least 30% in non-stock market (non-corrrelated) investments. Another consideration is the muli-generational stretch which an IRA with the right custodian can accomplish much better than the TSP.

I doubt very much that most Federal employees have 30% of their IRA in assets other than stocks, bonds or mutual funds. The beneficiary of a TSP account can transfer it to an IRA, so that if the beneficiary is a trust, the multi-generational stretch will be available. Of course, the employee has to roll it over into an IRA if he/she wants to convert to a Roth. Bruce Steiner, attorney NYC also admitted in NJ and FL

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