Why transfer your TSP to a personal IRA?

Free Up The Money! 

You can request only one partial withdrawal from TSP. If you roll it over to an IRA you have access to all of the money if needed. You can take numerous partial withdrawals, lump sum, monthly income, interest only and guaranteed lifetime income.

Partial withdrawal restriction:

TSP allows only one partial withdrawal over the life of the account. An IRA has no such restriction.

Not multi-generational:

The IRA can be "Stretched” to non-spousal beneficiaries which will substantially reduce taxes. The TSP cannot be "Stretched” and your spouse cannot make contributions to the TSP as they can with the IRA. If your spouse takes the TSP in lump sum they will be fully taxed. The IRA is easily passed to the spouse with no tax.

Self-management risk:

In 2008 the TSP C fund lost 36.99%, the S fund lost 38.32% and the I fund lost 42.43%. Trying to time these ups and downs is very risky and the TSP only allows two allocation changes per month. With an IRA you can eliminate these risks.

More investment choices: 

The TSP has five investments plus a group of lifestyle funds, an IRA can accommodate nearly any investment including real estate, commodities, annuities, individual stocks, and even certificates of deposits.

Less hassle at 70 1/2 minimum distribution age:

Current regulations require starting to withdraw from retirement plans at age 70 ½. If all funds are in IRA's, the withdrawal only has to come from one of the IRAs. If some funds are in 401(k) type accounts (TSP), a withdrawal has to come from the TSP and the IRAs.

More flexibility to set up periodic income distributions…start, stop, increase, decrease:

TSP allows distributions of monthly income, but that distribution is not very flexible. An IRA can distribute monthly income, and that distribution can be stopped, restarted, increased or decreased any time depending upon where it is invested.

Timing of payments to beneficiaries:

This is taken directly from the TSP death benefit information booklet found on the TSP website. "Payments to Beneficiaries can take several months from the time the TSP is notified of the participant's death”. Do you want your beneficiaries to be forced to wait months to receive the TSP proceeds? With an IRA they won't have to.

Quicker response time on withdrawals:

A withdrawal from the IRA generally can be done in a few days or less, not so with the TSP.