TSP rollover after separation: moving part of it to a gold IRA

Before you can start

The TSP has to know you've left. Your former agency or service reports your separation date, and only then does My Account let you request a post-separation distribution. The Distributions booklet warns this can sometimes take up to 30 days, so if you are planning a rollover around a retirement date, allow for it.

Two edge cases from the same booklet. If you are rehired by the federal government after a break of less than 31 full calendar days, you can't take a distribution at all. With a longer break you can, but the request has to be received and paid while you are still separated. And any account hold (a court order, a tax levy, suspected fraud) blocks withdrawals until it is lifted.

The four ways to take money out, and which roll over

tsp.gov gives separated participants four options, and you can combine them:

For a gold IRA, the partial distribution is the most flexible of the four. You pick the amount, the TSP pays it to the IRA custodian, and the rest of your account carries on as before. A total distribution closes the account: tsp.gov says that once it is processed you can no longer move money into the TSP from other plans.

Keeping the TSP open

You can keep your TSP account after you separate as long as your vested balance is $200 or more. You still choose how it is invested, and you can still roll money into it from eligible employer plans and traditional IRAs. Nothing has to come out until required minimum distributions begin.

On the way out, check vesting. If you haven't served long enough to vest in the Agency Automatic (1%) Contributions (for most FERS employees, 3 years), those contributions and their earnings are forfeited before any distribution is made.

The age-55 rule, and what it means for money leaving the TSP

Normally, taxable money taken out of a retirement account before 59½ carries a 10% early withdrawal tax on top of income tax. The TSP's tax booklet lists the exceptions. One matters a great deal here: payments made after you separate from service during or after the year you reach 55 are exempt. For public safety employees as defined in the tax code, it is 50, or 25 years of service under the TSP.

The IRS table of exceptions shows this one applies to plans like the TSP, not to IRAs. So if you left at 56 and roll everything into an IRA, a withdrawal from that IRA at 57 generally carries the 10% tax that the same withdrawal from the TSP would have avoided. The exception covers whatever stays in the plan and nothing that leaves it. How much of that matters depends on when you expect to need cash and on the rest of your return, which is exactly the ground a tax professional can cover with you before you choose an amount.

Your spouse's rights

tsp.gov spells these out. If you are a married FERS participant (or a member of the uniformed services) and ask for a partial distribution, your spouse must give written, notarized consent. For a total distribution with an account balance over $3,500, your spouse is entitled by law to a joint life annuity with a 50% survivor benefit; anything else needs your spouse's notarized waiver. If you are a married CSRS participant, the TSP notifies your spouse instead.

If you are already at RMD age

RMDs from traditional TSP money begin at 73 if you were born before 1960 and at 75 if you were born in 1960 or later. In a year you are subject to one, the TSP takes the RMD out of any traditional distribution first and pays it to you; only the rest can be rolled over. A traditional gold IRA then has RMDs of its own, and metal produces no cash. The IRS lets the RMDs of all your traditional IRAs be added up and taken from whichever of them you choose (RMD FAQ, question 5), so a separate traditional IRA can cover the gold IRA's share. Without one, the gold IRA pays its RMD by selling metal or by handing over coins.

The order of things

1. Confirm in My Account that your separation date has been reported.
2. Decide the amount and the source (traditional, Roth or both). The TSP can send the traditional part to one IRA and the Roth part to another.
3. Open the gold IRA with the dealer and custodian. Goldco's minimum is $25,000.
4. Get the custodian's rollover details; the TSP won't accept another institution's rollover form.
5. Request the partial distribution in My Account as a direct rollover, with any spouse consent.
6. The TSP pays the custodian by U.S. Treasury check; then you choose the metal.

Each step is set out with what you need and how long it takes on the main worksheet. If you also have a 401(k) from a later job, the gold IRA rollover steps are the same. Gold IRA Companies Ranked covers them in a guide to moving a workplace plan into metal, and keeps the dealers' complaint and court records as well.