TSP Withdrawal Taxes as a Rollover Into a Roth IRA

Before you roll your TSP into a ROTH IRA, you should consider the taxes on a TSP withdrawal that the IRS may impose.  It might be wise for you to consult with a tax expert before trying to initiate a TSP withdrawal to Roth IRA rollover. The IRS rules and TSP Withdrawal Taxes treatment that govern the movement of funds in and out of Roth IRAs can be highly complex, and the result varies a lot based on your specific circumstances.

For example, if you are trying to transfer or rollover part of your traditional TSP (non-Roth) balance into a Roth IRA, you’d be required to pay income tax on it up front before it goes into the Roth IRA, and the Thrift Savings Plan may be able to withhold the required taxes.

If you try to transfer or rollover funds from a Roth TSP to a Roth IRA or eligible employer plan, you must have satisfied a 5-year rule on contributions made to the IRA.

A Roth account maintained by an eligible employer plan, or moving a Roth balance to a Roth IRA, means there should be no taxes in the current year.  The TSP is unlikely to withhold taxes, but given the number of moving parts and, more importantly, the penalties that could be imposed if you did any of this incorrectly, it is always recommended to work with a professional who understands your needs and the various tax implications associated with your plans and who can provide you with appropriate TSP advice.