Can I Contribute to TSP After I Retire?

The Thrift Savings Plan (TSP) is a defined contribution retirement savings and investment program for United States civil service employees and uniformed service members. Resembling private sector 401(k) plans, it offers a structured, tax-advantaged way to save for retirement. The TSP complements other federal retirement systems like the Federal Employees Retirement System (FERS) annuity and Social Security. Individuals contribute a portion of their income, and federal agencies often provide matching contributions.

Post-Retirement Contribution Rules

Upon separating from federal service or the military, direct payroll contributions to a TSP account cease. This includes employee, agency matching, and agency automatic contributions. After retirement, the primary method for adding funds to a TSP account is through rollovers or transfers from other eligible retirement plans, such as 401(k)s, 403(b)s, and traditional Individual Retirement Accounts (IRAs).

There are two main types of rollovers: direct and indirect. A direct rollover sends funds directly from the previous plan or IRA to the TSP, avoiding immediate taxation and federal income tax withholding. This method simplifies the process. For traditional (pre-tax) funds, participants use Form TSP-60, “Request for a Transfer Into the TSP.”

An indirect rollover involves funds paid directly to the participant, who then has 60 days to deposit the money into the TSP or another eligible retirement plan. Indirect rollovers typically involve a 20% federal income tax withholding. To avoid this withholding and potential penalties, participants must deposit the full amount, including the withheld portion, into the TSP within the 60-day window.

For Roth funds, the TSP accepts direct rollovers of qualified Roth distributions from Roth 401(k)s, Roth 403(b)s, and Roth 457(b)s using Form TSP-60R, “Request for a Roth Transfer Into the TSP.” The TSP does not accept rollovers or transfers from Roth IRAs. Transferred funds do not count against annual Internal Revenue Code contribution limits.

Managing Your TSP Account in Retirement

After retirement, a TSP account remains active, with funds continuing to grow or decline based on investment performance. Participants retain control over their investment allocations, adjusting strategies to align with retirement goals. This includes performing interfund transfers between Lifecycle (L) Funds or individual core funds.

Maintaining an up-to-date beneficiary designation is important for managing a TSP account in retirement. Properly designating beneficiaries ensures account funds are distributed according to the participant’s wishes upon death. This is typically done using Form TSP-3, “Designation of Beneficiary,” or through the online TSP portal. Review and update this designation periodically, especially after significant life events like marriage, divorce, or the birth of a child.

Retirees can access account information, statements, and TSP customer service. Participants can log into their online account to view balances, transaction history, and make investment changes. Keeping contact information, including mailing address and email, current with the TSP ensures timely receipt of important communications and account updates. This proactive management helps ensure the account continues to serve its intended purpose throughout retirement.

Accessing Your TSP Funds

Retirees have several options for accessing funds from their TSP account:

• Partial withdrawal: A single payment of a specified amount.
• Total withdrawal: Liquidates the entire account balance.
• Installment payments: A fixed dollar amount or based on life expectancy, paid monthly, quarterly, or annually.
• Life annuity: Purchase from the TSP’s vendor, providing guaranteed monthly payments for life.

To initiate a withdrawal, participants generally use the TSP website or Form TSP-99, “Withdrawal Request for Separated and Beneficiary Participants.” Online tools streamline the request, though some situations may still require printing and submitting a web-generated form with signatures or notarization.

Required Minimum Distributions (RMDs) are mandatory withdrawals that Traditional TSP participants must begin taking from their accounts. RMDs typically start in the year participants turn age 73, or the year they separate from federal service, if later. This age will increase to 75 for those born in 1960 or later. RMDs are calculated based on the account balance at the end of the previous year and the participant’s life expectancy, using IRS tables. Failing to take the full RMD can result in significant penalties, though the TSP often automatically issues payments to satisfy these requirements by December 31st each year. Roth TSP balances are generally exempt from RMDs.

Withdrawals from the TSP have tax implications. Traditional TSP withdrawals are subject to federal income tax as ordinary income and may also be subject to state income tax. Withdrawals taken before age 59½ may incur an additional 10% early withdrawal penalty, unless an exception applies (e.g., separation from service at age 55 or later, or age 50 for qualified public safety employees). Qualified withdrawals from Roth TSP accounts are tax-free, provided the account has been open for at least five years and the participant is age 59½ or older, disabled, or deceased. The TSP allows participants to designate whether withdrawals come from their traditional balance, Roth balance, or a proportional mix.