If you’re considering How to roll over TSP funds this year, it’s important to be aware of the recent changes affecting the process. The Thrift Savings Plan (TSP), a popular retirement savings plan for federal employees and military personnel, has undergone updates in 2026 that may impact your rollover options, timing, and tax implications. Understanding these changes will help you make informed decisions when moving your retirement funds.

Overview of the Thrift Savings Plan and Rollovers

The TSP is a defined contribution plan similar to a 401(k), offering several investment funds. When leaving federal service or reaching a certain age, many participants consider rolling over TSP funds to other retirement accounts such as IRAs or employer-sponsored plans.

A rollover is a transfer of funds from one retirement account to another, typically done to consolidate accounts or access broader investment choices. Knowing how to roll over TSP funds correctly is essential to avoid taxes and penalties.

Recent Changes Affecting TSP Rollovers in 2026

The 2026 updates to the TSP rollout procedures come in response to regulatory adjustments and legislative changes aimed at increasing flexibility while enhancing tax compliance.

1. Expanded Rollover Destinations

Previously, TSP rollovers were mainly allowed into traditional IRAs and eligible employer plans. Now, rollovers can also be made directly to Roth IRAs under clearer guidance, with specific rules applying to after-tax and Roth contributions within the TSP.

This expansion means that if you have Roth TSP funds, you can roll these over directly into a Roth IRA without creating a taxable event, given you follow the IRS rules on timing and amount.

2. New Timing Rules and Grace Periods

The IRS has extended the time frame participants have to complete rollovers from 60 days to 120 days in certain circumstances, reducing the risk of accidental taxation due to rollover delays.

Additionally, the TSP now provides more explicit instructions and support for initiating rollovers within these time frames, including easier access to required tax forms.

3. Updated Withdrawal Thresholds and In-Service Rollovers

The minimum withdrawal age tied to rollovers has been adjusted to align more closely with other federal retirement rules. This change affects when participants can perform in-service rollovers of their TSP funds to outside accounts without penalties.

If you are still employed but want to move part of your TSP balance to another plan, these adjustments may broaden your options.

How to roll over TSP Funds: Step-by-Step

Preparing to roll over your TSP funds requires careful planning and compliance with the new policies. Here’s a practical guide on how to roll over TSP funds post-2026 updates.

Step 1: Confirm Your Eligibility and Understand Your TSP Account Type

Identify whether your TSP account contains traditional (pre-tax), Roth (after-tax), or a mix of both contribution types. The type will influence your rollover options and tax consequences.

Also, check if you have separated from federal service or if you qualify for an in-service rollover under the new rules.

Step 2: Decide Your Rollover Destination

Choose the type of account to roll your funds into:

  • Traditional IRA: Generally for pre-tax funds.
  • Roth IRA: For Roth contributions; may trigger taxes if converting pre-tax funds.
  • Employer-Sponsored Plan: Can accept transfers depending on plan rules.

Consider investment options, fees, and withdrawal rules available in your destination account.

Step 3: Request a Direct Rollover from TSP

To avoid tax withholding and penalties, request a direct rollover—meaning TSP sends your funds directly to the new plan custodian or IRA provider.

This process is facilitated online via the TSP website or by submitting Form TSP-70. Keep copies of all paperwork for your records.

Step 4: Verify Receipt and Investment of Funds

Once the rollover is complete, verify with your new account administrator that the funds arrived and are invested according to your instructions.

Mistakes here can cause unnecessary tax complications or penalties.

Step 5: Keep Track of Reporting and Tax Forms

After completing the rollover, you’ll receive tax forms such as the 1099-R from TSP and possibly a Form 5498 from your IRA custodian. Review these documents carefully, and provide them to your tax preparer.

Accurate reporting ensures compliance with IRS regulations and avoids audits.

Practical Examples of TSP Rollovers After 2026 Changes

Example 1: Rolling Over Roth TSP to Roth IRA

Jane separated from federal service in 2026 and has $50,000 in her Roth TSP account. Thanks to the new rules, she arranges a direct rollover into her Roth IRA, avoiding tax on the transfer. She completes this within the 120-day window to prevent issues.

Example 2: In-Service Rollover of Traditional TSP Funds

Mark is still employed federally but wants to move $20,000 from his traditional TSP to his 401(k) plan. Because of the recent changes to minimum age requirements, Mark is eligible to make this in-service rollover without penalty, helping him consolidate his retirement savings.

Common Questions About Rolling Over TSP Funds

Q: Can I roll over Roth contributions separately from traditional TSP funds?

Yes, the TSP allows separate rollovers of Roth and traditional funds. It’s important to keep these separated because they have different tax treatments.

Q: What happens if I miss the 120-day rollover deadline?

If you don’t complete the rollover within the IRS deadline, the distribution may be treated as taxable income and could be subject to early withdrawal penalties. Contact TSP and your tax advisor immediately if this happens.

Q: Are there tax consequences when rolling over TSP funds to a Roth IRA?

Rolling over pre-tax traditional TSP funds to a Roth IRA is a conversion and generally triggers a tax bill on the amount converted. Roth TSP funds can be rolled directly without tax consequences.

Q: Does the TSP allow partial rollovers?

Yes, you can roll over a portion of your TSP balance, but be mindful of account minimums and withdrawal rules.

Key Takeaways

  • The 2026 changes to how to roll over TSP funds offer more flexibility, especially for Roth accounts.
  • Take advantage of the extended 120-day rollover deadline in specific situations.
  • Always opt for a direct rollover to avoid automatic tax withholding and penalties.
  • Know your account types and resulting tax implications before starting the rollover process.
  • Keep detailed records and consult a tax professional if uncertain about your situation.

Understanding these recent updates will help you navigate the rollover process with confidence and avoid unexpected tax consequences. Staying informed is key when deciding how to roll over TSP funds to best suit your retirement goals in 2026 and beyond.

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