It is a good idea to keep your account open, unless there are specific reasons for moving funds.
The tax-free rolling of any amounts that are not carried over in the 60-day time frame is not possible without a waiver. The amounts that are not rolledover must instead be considered taxable distributions from an IRA, qualified retirement plan or the TSP. Even if the 60 day period ends in the following calendar year, these amounts will be taxable for the year they are distributed. If the IRA owner turns 55 years old, there may be a 10% penalty for early withdrawal.
Recognize that there are conflicts of interests. As a result, financial professionals might be paid commissions and other fees if they recommend an IRA rollingover. A financial professional likely will not be compensated if assets are left in the TSP, or assets are transferred to an employer-sponsored plan. Even if your recommendation is solid, any financial advisor who suggests that you transfer money from the TSP to an IRA may be financially benefited by it.
Do you know Americans save more for retirement than they do in retirement-related plans such as the Thrift Savings Plan or TSP? According to the Employee Benefit Research Institute, the biggest source of IRA contributions is from people who transfer their money from the TSP (or similar 401(k), or 403(b plans) when they quit a job.
You can “rollover” money that you have received from an eligible traditional IRA plan or plan. The funds are then transferred to your TSP account. Roth money cannot be transferred into the TSP. You must do your rollover no later than 60 days after you get your funds. To rollover eligible traditional money, use Form TSP-60 (Request for a Transfer to the TSP).
Taxes are not due on money that you send in right away. Depending on which type of money is transferred, income taxes may be due when withdrawals are made from your TSP account. You can find more tax information about withdrawals from your TSP account at Important Tax Information.
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