If you’re considering moving your Thrift Savings Plan (TSP) funds to another retirement account in 2026, understanding your TSP rollover options is key. Rollover choices can impact your tax situation, growth potential, and future retirement income. This guide breaks down your main options — including IRAs and annuities — along with important IRS limits and rules that apply in 2026.

What Is a TSP Rollover?

A TSP rollover allows you to move money from your government Thrift Savings Plan to another qualified retirement account without triggering taxes or penalties. This typically happens when you separate from federal service or become eligible to withdraw funds. Options include rolling over into a Traditional IRA, Roth IRA, another 401(k) or qualified plan, or annuity products offered outside the TSP.

Key IRS Contribution and Distribution Rules for 2026

Before diving into rollover options, keep these verified IRS figures in mind for 2026, as they affect your savings and withdrawals:

  • Employee Deferral Limits: For 401(k), 403(b), 457 plans and TSP, the standard employee contribution limit is $24,500. Catch-up contributions for those 50 and older are $8,000. For ages 60-63 catch-up, it’s $11,250.
  • IRA Contributions: Traditional and Roth IRAs share a $7,500 combined annual limit, with a catch-up of $1,100 for those 50+ ($8,600 total).
  • Roth IRA Phase-Out: Contribution eligibility phases out between $153,000 and $168,000 for single or head of household filers, and $242,000 to $252,000 for married filing jointly.
  • Traditional IRA Deduction Phase-Out: If you’re covered by a workplace retirement plan, the deduction phases out at $81,000-$91,000 (single) or $129,000-$149,000 (married filing jointly).
  • Required Minimum Distributions (RMDs): RMDs start at age 73, or at 75 for those born in 1960 or later.

Tax rules adjust annually, so it’s wise to check the latest IRS announcements when making decisions.

Main TSP rollover options Compared

Here’s a practical comparison of the most common accounts where you can roll your TSP balance:

1. Traditional IRA

Rolling your TSP into a Traditional IRA generally maintains tax-deferred status, meaning you don’t pay taxes at rollover time.

  • Pros: Wide investment choices, flexible withdrawal rules compared to TSP, and no immediate tax impact.
  • Cons: You’ll face RMDs starting at age 73 (or 75, depending on birth year). Some IRA providers charge annual fees or impose account minimums.
  • Contribution Limits: The IRA limit remains $7,500 in 2026, but rollover contributions do not count toward this limit.

2. Roth IRA

If you prefer tax-free growth and withdrawals, a Roth IRA rollover is an option, but taxes apply on pre-tax TSP funds converted to Roth.

  • Pros: Qualified withdrawals after age 59½ are tax-free. No RMDs during your lifetime. Allows tax diversification in retirement.
  • Cons: You owe income tax on rollover amounts converted from your Traditional TSP balance. Eligibility to contribute to Roth IRA phases out at higher incomes.

3. Staying in the TSP or Rolling to Another Employer Plan

Depending on your employment, you may leave your funds in the TSP or roll them into another employer’s qualified plan such as a 401(k).

  • Pros: Potentially lower fees with TSP. Employer plans might offer loans or other features.
  • Cons: Employer plans vary widely in investment options and costs.

4. Fixed Indexed Annuities (FIA) and Multi-Year Guaranteed Annuities (MYGA)

Beyond IRAs, some savers consider annuity products outside of the TSP for guaranteed income or growth features. These are insurance products with distinct features and rules.

Fixed Indexed Annuities (FIA)

FIAs offer index-linked growth potential, subject to caps, participation rates, or spreads. Growth is never negative due to a 0% floor in down years. Optional lifetime income riders are available for income planning.

  • Pros: Can help offset inflation with index-linked growth, provide steady lifetime income options, suited to longer time horizons and retirement income needs.
  • Cons: Caps and participation rates may limit upside gains; rider fees and surrender charges are common; FIA guarantees depend on the insurer’s claims-paying ability, not the government.

Multi-Year Guaranteed Annuities (MYGA)

MYGAs pay a fixed, known interest rate for a specific period, offering simplicity and predictability.

  • Pros: Known returns and no market risk during the guarantee period, often better suited for short time horizons.
  • Cons: Typically no growth potential above the fixed rate; surrender periods sometimes longer; no index-linked upside like FIAs.

How to Choose the Right Rollover Option

Selecting the best TSP rollover option depends on your personal goals, timeline, and risk tolerance:

  • Want flexibility and broad investment choices? Consider a Traditional or Roth IRA.
  • Looking for tax-free withdrawals? A Roth IRA rollover may be attractive if you can handle the upfront tax bill.
  • Planning for steady retirement income? FIAs can provide index-linked growth with potential lifetime income riders beneficial for retirees.
  • Prefer guaranteed, predictable earnings? MYGAs offer fixed rates typically good for shorter holding periods.
  • Lower costs and simplicity? Staying with the TSP might be best if you like the plan’s features.

Consult with a financial professional to align your rollover with your retirement strategy and tax situation.

Frequently Asked Questions About TSP rollover options

Can I rollover my TSP directly into a Roth IRA?

Yes, but this is considered a Roth conversion. You will owe income tax on the pre-tax amounts converted. It’s important to plan for the tax consequences before completing this type of rollover.

Are rollover contributions counted towards IRA annual limits?

No. Rollovers from qualified plans like the TSP do not count toward the annual IRA contribution limit of $7,500 in 2026.

What happens if I don’t take Required Minimum Distributions (RMDs)?

If you fail to take RMDs starting at age 73 (or 75 if born in 1960 or later), you may face a significant IRS penalty, which underscores the importance of understanding age-related rules.

Can I use an FIA to create lifetime income from my rollover funds?

Yes. Fixed Indexed Annuities offer optional lifetime income riders that provide steady income streams for life, subject to each product’s terms and insurer guarantees.

Summary: Making the Most of Your TSP rollover options in 2026

Choosing among TSP rollover options in 2026 means weighing tax consequences, investment flexibility, income needs, and personal preferences. Traditional and Roth IRAs offer broad flexibility and tax advantages, while annuities like FIAs provide structured income and index-linked growth potential with insurance guarantees. MYGAs suit savers seeking fixed, known rates for shorter terms. Always factor in IRS limits and distribution rules effective in 2026, and consider speaking with a retirement planning professional before deciding. At FixedIRAs.com, we provide educational resources to help you understand your choices clearly and make confident, informed rollover decisions.

Additional Educational Resources

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For more background, see our IRA Rollovers resource.

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