I have been researching what do with a an old 401k and there is a lot of information on the pros and cons of rolling it over into a new 401k plan versus an IRA. I also have a TSP account with a small balance from a brief period as a federal employee. Interestingly, it seems like I could also roll my old 401k into the TSP even though I am no longer a federal employee.

I imagine the pros and cons of this are similar to those for a new 401k plan. However, I could not find much information specific to TSP rollovers. Is there anything about the TSP, other than the low expense ratios, that would make it a more or less attractive option that I should consider?

In my case leaving the old 401k be seems like the wrong decision since the expense ratios range from 0.6% to 1.1%.

1 Answer 1


The TSP has very low expenses on funds and most have annual expenses of about 0.041% of assets. They also have a lot of sophisticated withdrawal choices, like the ability to make a pseudo-pension by making monthly distributions. The level of service is also good, with a modern website and responsive and knowledgeable customer service (in my experience when contacting them for a family member). These are substantial advantages over many other plans, but are probably similar to the best IRA rollover alternatives like Fidelity, Vanguard, and Charles Schwab.

The worst downside that I see for the TSP is that there are limited fund choices relative to the major mutual fund families at Fidelity, Vanguard, and Charles Schwab. There are a government bond fund (G), a broader fixed income fund (F), a US large cap fund (C), a US small cap fund (S), an international stock fund (F), and life cycle (target date) funds which combine the other funds. No REIT choices, no small cap international exposure, and no choices that target specific industries, commodities, or countries.

However, there is an additional consideration. Upon reaching age 70 and 1/2, holders of IRAs and 401ks are required to take minimum distributions (RMDs). There is a special exception for the 401k of your current employer. You don't need to take withdrawals from the account at your current employer. Therefore, it may be tax efficient to put money in that account if you are close to that age. However, if you do roll over the money into the TSP or a IRA, I believe you can generally subsequently roll that money over from that account to your 401k at your employer. As such, one possibility if you hate your current employer's plan but expect to be there a long time is to roll over the money in question to the TSP, and then roll it over into your current employer's plan when you get to 69.

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