Resources/Downloads/TSP Separation Checklist

TSP Separation Checklist

A focused checklist for federal employees leaving government service — covering every TSP decision you need to make.

Updated March 2026 • For separating federal employees • 50+ action items across 5 sections

Important: TSP decisions at separation are largely irreversible. Rollovers, once completed, cannot be undone. TSP loans not repaid within 90 days become permanent taxable distributions. Review each section carefully before acting.

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Quick Reference: Key TSP Deadlines

Loan repayment window:90 days after separation date

Rule of 55 eligibility:Separate in the calendar year you turn 55+

RMD start age:Age 73 (by April 1 of following year)

Roth IRA RMDs:None during your lifetime (roll out of TSP first)

TSP rollover window:No hard deadline, but sooner avoids inaction bias

72(t) minimum payment period:5 years or until age 59½, whichever is longer

Before You Separate

Take these steps while still in federal service. Some actions cannot be undone once you separate.

TSP Loan Status

Log in to tsp.gov and navigate to My Account > Loans to check for any outstanding loan balance
If you have an outstanding loan, you have 90 days after separation to either repay in full or allow it to be declared a taxable distribution
Contact TSP at 1-877-968-3778 to request an exact payoff amount (balances accrue interest daily)
Submit full repayment before your separation date if possible — this avoids unexpected tax liability
If you cannot repay, plan for the 1099-R from TSP and set aside funds for federal and state income taxes; a 10% early withdrawal penalty may also apply if under age 59½ and not covered by the Rule of 55
TSP residential loans have the same 90-day rule as general purpose loans — no special treatment

Beneficiary Designation Review

Log in to tsp.gov > My Account > Beneficiaries to confirm current designations
Verify primary beneficiary name, SSN, relationship, and percentage are correct
Add or update contingent (secondary) beneficiaries in case primary predeceases you
Confirm beneficiary form is a Form TSP-3 — informal instructions (e.g., in a will) do NOT override the TSP-3 on file
If married, note that TSP requires spousal consent to designate anyone other than your spouse as primary beneficiary
Download a copy of your TSP-3 and store it with your other estate planning documents

Vesting Confirmation

Confirm you have at least 3 years of civilian federal service to be vested in agency automatic (1%) contributions
Special rules: FERS-RAE and FERS-FRAE employees also vest in 3 years; law enforcement and firefighters may have different rules
You are ALWAYS vested in your own contributions (traditional and Roth) and their earnings
You are ALWAYS vested in agency matching contributions (the 4% match for employees contributing 5%+)
Only the 1% agency automatic contribution has a 3-year vesting requirement — check your service computation date

Current Allocation & Fund Review

Review your current TSP fund allocation at tsp.gov
Decide whether to rebalance before or after separation (allowed in either case)
Consider moving to a more conservative allocation if you plan to begin withdrawals soon
TSP offers G, F, C, S, I, and L funds — understand what you own before deciding to stay or move
Note: once you roll over to an IRA, you lose access to the G Fund (guaranteed government bond fund), which offers inflation-adjusted returns unavailable elsewhere

Your 4 Options After Separation

You have four choices for your TSP after separating. You do not need to decide immediately — TSP will hold your account.

Option 1: Leave Your Money in TSP

You can leave your TSP balance in the plan indefinitely after separation (no forced distribution until RMDs begin)
Advantages: lowest fund expenses in the world (~0.048% expense ratio), access to unique G Fund, no transaction fees
Disadvantages: limited investment options compared to a brokerage IRA, no ability to add new money after separation
You can still manage allocations and make interfund transfers while your balance remains in TSP
Required Minimum Distributions (RMDs) must begin at age 73 — TSP will calculate and send these automatically
Best for: employees who value simplicity, low costs, or the unique G Fund protection

Option 2: Roll Over to an IRA

You can do a direct rollover (trustee-to-trustee) from TSP to a traditional IRA or Roth IRA with no taxes owed at transfer
Roth TSP balance should roll to a Roth IRA; Traditional TSP balance should roll to a Traditional IRA to avoid taxable event
Rolling Traditional TSP to a Roth IRA is a Roth conversion — taxable in the year of conversion
IRA advantages: more investment options, more flexible withdrawal rules, potential access to a financial advisor's platform
Request a direct rollover (not a distribution check) — if TSP sends you a check, you have 60 days to deposit it or it becomes taxable
Use TSP Form TSP-70 (Full Withdrawal) or TSP-77 (Partial Withdrawal) to initiate — or use the online withdrawal tool at tsp.gov

Option 3: Roll Over to a New Employer Plan

If you are taking a private sector or state/local government job, check if your new employer's 401(k) or 403(b) accepts rollovers from TSP
Rolling to a new employer plan maintains tax-deferred status with no taxes at transfer
Confirm the new plan accepts the Traditional/Roth split correctly — not all plans accept Roth rollovers
Evaluate the new plan's investment options and fees vs. staying in TSP before deciding
Request a direct rollover from TSP to the new plan — get the receiving plan's routing and account information from the new employer first

Option 4: Full or Partial Withdrawal

You can withdraw all or part of your TSP balance as a lump sum at any time after separation
Lump sum withdrawals from Traditional TSP are ordinary income in the year received — potentially a large tax hit
Federal tax withholding: TSP withholds 20% mandatory on eligible rollover distributions taken as cash
State taxes may also apply depending on your state of residence
If under age 55 at time of separation (and not meeting Rule of 55), a 10% early withdrawal penalty applies on top of income tax
Installment withdrawals (monthly, quarterly, annual) are also available — may be more tax-efficient than a single lump sum

Age-Based Rules & Strategies

Your age at separation determines which special rules apply. Know your situation before you separate.

Rule of 55 (Age 55–59½)

The Rule of 55 allows penalty-free TSP withdrawals if you separate from federal service in the calendar year you turn 55 or later
This eliminates the 10% early withdrawal penalty — federal income taxes still apply
Applies to the employer plan you separate FROM — so it applies to TSP if you leave federal service at 55+
If you roll TSP to an IRA before age 59½, you LOSE the Rule of 55 protection for that money
The rule applies to your entire TSP balance once triggered, not just post-55 contributions
Verify your separation year meets the Rule of 55 requirement — if you turn 55 in December but retire in November, it may not apply

72(t) SEPP Consideration (Under Age 55)

If you separate before age 55 and need income before 59½, Substantially Equal Periodic Payments (72(t)/SEPP) allow penalty-free withdrawals
72(t) requires taking substantially equal payments for at least 5 years OR until you reach age 59½, whichever is longer
Three IRS-approved calculation methods: Required Minimum Distribution, Fixed Amortization, Fixed Annuitization
Once started, SEPP payments generally cannot be modified without a 10% retroactive penalty on all prior distributions
Consider whether staying in TSP (Rule of 55 eligible after rollover restrictions) vs. rolling to an IRA is better for 72(t) purposes
Consult a CPA or fee-only financial advisor before electing a 72(t) — mistakes are expensive and hard to reverse

Roth Conversion Opportunity

The year(s) between separation and starting Social Security or a pension may be a low-income window — ideal for Roth conversions
A Roth conversion moves money from Traditional TSP/IRA to a Roth IRA, triggering ordinary income tax now for tax-free growth later
Calculate your marginal tax bracket in your conversion year — filling the 12% or 22% bracket is often cost-effective
Watch for IRMAA (Medicare premium surcharges) — large Roth conversions can trigger surcharges 2 years later
A partial rollover strategy: leave TSP, roll just a portion to IRA each year, convert that portion to Roth in the same low-income year
Roth TSP contributions already made are not subject to conversion taxes when transferred directly to a Roth IRA

RMD Timeline (Age 73+)

Required Minimum Distributions must begin by April 1 of the year following the year you turn 73 (SECURE 2.0 Act)
If you wait until April 1 of the following year for your first RMD, you must take a second RMD by December 31 of that same year — potentially two taxable distributions in one year
TSP calculates and sends RMDs automatically if you leave money in the plan — no action needed
If you roll to an IRA, RMD responsibility is yours (broker will calculate and remind, but you must request)
Roth TSP is subject to RMDs while money is in TSP — rolling Roth TSP to a Roth IRA eliminates RMD requirement during your lifetime
Plan RMD income as part of your overall retirement tax strategy — they cannot be skipped without a 25% penalty

Tax Withholding & Income Planning

TSP decisions have significant tax implications. Plan ahead to avoid under-withholding or unnecessarily large tax bills.

Withholding Decisions on TSP Distributions

TSP withholds 20% mandatory federal income tax on eligible rollover distributions paid directly to you (lump sums, installments)
You can increase withholding by completing a W-4P or equivalent TSP form, but cannot decrease below 20% for eligible rollovers
State tax withholding varies — some states exempt federal retirement income, others do not
Estimate total income (TSP + pension + FERS Supplement + Social Security) to determine if you owe quarterly estimated taxes to avoid underpayment penalties
File IRS Form 1040-ES quarterly if your annual tax liability will exceed withholding by more than $1,000

Net Unrealized Appreciation (NUA) — If Applicable

NUA rules apply ONLY if your TSP includes employer stock in a publicly traded company — NOT applicable to standard TSP funds (G, F, C, S, I, L)
If you held employer stock in a prior 401(k) that was rolled into TSP, consult a tax advisor before separating
For standard TSP participants: NUA is not applicable — skip this row

Coordination with Pension Income

Your FERS pension begins paying 1–3 months after separation while OPM processes your case
TSP distributions are a second taxable income stream — sequence them carefully relative to pension start date
If you receive a large lump-sum annual leave payment at separation, that is also ordinary income — factor into that year's total
Social Security benefits may be partially taxable (up to 85%) depending on combined income — model this before starting Social Security
A fee-only financial advisor can model the optimal income sequencing across TSP, pension, Social Security, and Roth conversions

After Separation — Ongoing

Once you are separated, monitor these items regularly.

Ongoing Account Management

Update your address with TSP at tsp.gov if you move — TSP correspondence and 1099-R forms go to the address on file
Maintain tsp.gov login credentials — store username and backup authentication method securely
Review TSP account at least annually for investment performance, allocation drift, and beneficiary accuracy
If you start receiving TSP installment payments, verify amounts and frequency each year
If you initiate a rollover to an IRA, confirm the receiving institution credited the full amount — track the transfer

Key Contacts

TSP Thriftline: 1-877-968-3778 (Monday–Friday 7am–9pm ET)
TSP website: tsp.gov — manage account, update beneficiaries, initiate withdrawals
IRS Retirement Plans: irs.gov/retirement-plans for RMD tables and 72(t) guidance
OPM Retirement Services: servicesonline.opm.gov — track annuity processing status
Social Security Administration: ssa.gov/myaccount — verify earnings record and benefit estimates
FEHB carrier: keep carrier contact number for retirement continuation questions