As a military member or federal employee, you can be proactive and secure your future with the government’s Thrift Savings Plan.
With this plan in place to provide some basic investment options for retirement, it might also be wise to consider incorporating physical gold, silver, and other precious metals into that mix as an added safeguard against recessions, monetary devaluations, and economic collapse.In this guide, we’ll show you how to easily convert your Thrift Savings Plan (TSP) into a gold IRA or precious metals IRA. We’ll also cover what makes these accounts different, regulations and limitations, and other essential information to know before rolling over your TSP into a gold IRA.
Our goal is to provide you with the most accurate and reliable information to help you identify the best option to grow and protect your wealth today.
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What Is A Thrift Savings Plan (TSP)?
Federal employees have access to generous retirement savings through the Thrift Savings Plan (TSP). Established in 1986, TSP is an invaluable addition to the financial security offered by careers in government services with the same tax benefits as a regular 401(k).
Even members of our military and postal service can enjoy peace of mind with a Thrift Savings Plan – just like their counterparts working for private companies who benefit from 401(k) and 403(b) plans.
With a defined contribution plan like the Thrift Savings Plan, you aren’t guaranteed an exact rate of return on your retirement investments. This means they can be riskier than their counterparts known as defined benefit plans that guarantee a set pension amount in retirement. Your retirement money will depend on how well your investments perform.
As with 401(k)s, a TSP operates by allowing you to defer compensation and put the money instead into the retirement account, known as the Thrift Savings Fund, which is administered by a board of presidential appointees. Your program may also offer matching funds from your employer.
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TSP Investment Options
Investing in the Thrift Savings Plan (TSP) is a great way to save for retirement, but its options are somewhat limited. You have access to several distinct asset pools and must choose which ones you want – with no control over what’s inside. This means that you need to mix and match your preferences wisely to secure your future.
A TSP is offering a range of investment options that can help ensure financial security down the road. These plans include the Government Securities Fund, the Fixed Income Index Fund, and the Common Stock Index Fund. Lifecycle funds are also available, which are a combination of various funds as well.
Here’s an overview of the most popular TSP options:
- G Fund: Government Securities
- F Fund: Fixed Income Index
- C Fund: Common Stock Index
- S Fund: Small-Cap Stock Index fund
- I Fund: International Stock Index Fund
As an employee, you can either make the decision easy by selecting a Lifecycle fund based on your desired retirement date or take control and create customized investment mixes from these five individual funds.
Thrift Savings Plan Vs A 401(k) Plan
When it comes to retirement savings, the TSP and 401(k) plan have a lot in common. Both allow you to save with pre-tax dollars for your golden years – but how do they differ?
Generally speaking, government or federal employees will be able to use their TSPs option while private sector workers can take advantage of a traditional 401(k).
It’s worth noting that contributions from both plans are eligible for tax breaks when making withdrawals after the age 59 ½. Note that RMDs (Required Minimum Distributions) start kicking in once an individual hits 70 ½.
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Can I Convert My TSP To Gold?
When it comes to investing in precious metals, you may be out of luck with a TSP at first glance. But there’s still hope!
Once retired from a government job, your funds can easily be transitioned into another qualified employer plan or Individual Retirement Plan (IRA) like a gold IRA or precious metals IRA without any tax woes.
This gives savvy investors the chance to finally get their hands on gold and silver investments or even cryptocurrencies.
With that said, let’s take a closer look at the process of rolling over your TSP into a gold IRA or similar qualified retirement account.
TSP Rollover Regulations
When leaving federal service and you have a TSP, rolling over your funds to an IRA, 401(k), or other qualified plans is the way to go. However, when transferring money from one retirement account provider to another, it’s best to perform a direct rollover.
In a direct rollover (also called a transfer), you never receive a check for your distribution. Instead, your TSP plan provider will transfer the money directly into your new IRA account.
If doing an indirect rollover where you receive the funds from your TSP before transferring them to your IRA, you only have 60 days to fund your new IRA or the IRS will treat your money as a taxable distribution.
Overall, tax rules from TSP rollovers can be complicated, so you should always consult a tax advisor prior to attempting a rollover.
Furthermore, during this process of transition, it’s not advised for the individual to purchase for example stocks or bonds with their distribution. But unlike other investments, you don’t need to worry about counterparty risk when it comes to gold, silver, and other precious metals since they’re physical assets.
Precious metals have been prized possessions for thousands of years, and their value has withstood the test of time. In summary, they can offer real security in a volatile market.
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Advantages Of Rolling Over A TSP Plan To A Gold IRA
If you feel like your TSP or 401(k) is holding back your investment potential, rolling over your savings into a self-directed IRA gives you more freedom to pick and choose the assets you want to invest in – including precious metals.
Not only are your choices limited in the Thrift Savings Plan, but even decisions about when to change your portfolio are restricted. There’s no denying that self-directed IRAs are the better option for investors seeking flexibility and freedom compared to TSPs or 401(k)s.
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Important Information About TSP To Gold IRA Rollover
If you’re considering rolling over your TSP account, it pays to move it into another tax-deferred account so you can keep making contributions.
Otherwise, if transferred to a regular or Roth account, you’ll be obliged to declare your account value as part of your income for the current year, meaning that it becomes taxable.
A sensible alternative is transferring funds from your TSP into a Self-Directed IRA. Not only can you include physical precious metals but these investments will also remain untaxed until you decide to take contributions.
How To Rollover Your TSP Into A Gold IRA
With the help of a reputable precious metals company, it’s easier than ever to rollover your TSP into a gold IRA.
Here is how the process works in short:
- Step 1. To get started, request this FREE Gold IRA Guide from our #1 recommendation for gold IRA company and learn how to best invest in precious metals.
- Step 2. In the next step, you’ll be contacted by a Precious Metals Specialist to ask questions.
- Step 3. If you want to move forward, you’ll then speak with an IRA Specialist who will ask about your current retirement account and help to confirm rollover eligibility.
- Step 4. And if eligible to convert your existing retirement funds into a gold IRA, you’ll need to create an account with a custodian capable of handling self-directed IRAs.
- Step 5. Once the paperwork is done, you’ll roll over funds from your existing retirement account to a new Self-Directed IRA.
- Step 6. You can now purchase your precious metals.
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TSP To Gold IRA: FAQ
What Is The Thrift Savings Plan Contribution Annual Limit?
One of the best ways to contribute to future savings is by contributing a portion of each paycheck or even a percentage of your income into your TSP, and as of 2023, you can do so up to an annual limit of $22,500. Plus if you’re over 50 then you may be eligible for those extra hard-earned “catch-up” contributions of $7,500.
Who Is Eligible For Matching Contributions?
Matching contributions depend on whether you are covered by the newer Federal Employees Retirement System (FERS) or the older Civil Service Retirement System (CSRS). If you were hired after 1987 then you are part of the FERS and will receive matching contributions. Because the older CSRS system is more akin to a pension, individuals covered under this system are not eligible for matching contributions.
Can I Roll Over My TSP Into A Gold IRA?
No, but once retired from a government job, your funds can easily be transitioned into another qualified employer plan or Individual Retirement Plan (IRA) like a gold IRA or precious metals IRA without any tax woes.
What’s The Different Between Indirect Rollover & Direct Rollover?
In an indirect rollover, you withdraw the money from your TSP and deposit it into one or more IRAs. You must mark the deposit as a rollover rather than a contribution since the latter is limited to $22,500 a year (plus, $7,500 if over 50 years old).
Also, when considering an indirect rollover, it’s important to complete the process within 60 days or you could be facing some hefty IRS penalties. These mistakes can end up costing big bucks in taxes and prevent your retirement money from receiving tax-sheltered benefits.
The direct rollover on the other hand, also called a trustee-to-trustee transfer, moves the TSP assets or cash directly to one or more IRAs. You don’t touch the money – it goes directly into the new account(s). This means that you don’t have to worry about the 60-day deadline with the direct method, which is clearly the better way to go.
Why Should You Avoid Indirect Rollovers?
You should avoid indirect rollovers because they are taxed. The plan must withhold 20% to pay taxes if the rollover isn’t completed within the 60 days. In other words, you must deposit the cash within 60 days to avoid taxes on pretax contributions and gains and a 10% tax penalty if you’re under 59 1/2.
What Plans Allow Gold Bullion?
For those looking to diversify their retirement investments, precious metals such as gold bullion offer a unique option. You can own physical gold coins and bars in for example an individual 401(k) plan or a gold IRA.
Not only that but with a self-directed IRA, other commodities like silver, platinum, palladium and even cryptocurrencies are all accessible for investment.
Should I Choose To Invest In Physical Gold Or Paper Gold?
The advantage of physical gold is that there’s just one factor determining its value, which is the prevailing COMEX price of gold.
Even though the value of paper gold is influenced by the COMEX price of gold, it’s also influenced by other factors such as the strength of the individual mining company’s management, their exploration and local labor costs, as well as geopolitical conditions and regulations locally.
One of the main risks of owning paper gold is that it is not backed by physical gold, but rather a promise to deliver gold at some point in the future. This means that investors are relying on the issuer of paper gold to hold enough physical gold to meet their obligations. If the issuer does not have enough gold or goes bankrupt, investors could lose their entire investment.
Then, there’s also the fact that physical gold has retained its value throughout history and has to date never hit zero. Hence, why it’s riskier to own gold stocks than physical gold.
For more information, you can visit our article on Paper Gold Vs Physical Gold: What Is The Better Investment?
What Are The Benefits With An IRA Compared To A TSP?
An IRA offers greater control and flexibility over your retirement investments. With an IRA, you have the ability to diversify your portfolio with access to more investment options than just stocks or mutual funds in the TSP – like REITs (mutual funds that invest in commercial real estate).
Additionally, there are no additional alternatives such as commodities and gold available within a TSP plan. So if you’re looking for more variety when it comes to investing for retirement security then look into opening up an IRA.
What Are The Disadvantages With An IRA Compared To A TSP?
IRAs typically have higher expense ratios. With the rise of competition in index funds, lower fees are becoming more accessible. But even so, TSP’s offering is still one of the lowest expenses out there at only 0.04%.
However, this low-cost benefit may come with a tradeoff: investors should be aware that returns on investments through TSP can end up being significantly less than other providers.
Top 6 Gold IRA Companies
To help you identify the best option to protect and grow your wealth today, we have reviewed and rated the top 6 precious metals companies in the industry for regular purchases and gold IRAs.
We have rated each company on a variety of factors including BBB/BCA ratings and complaints, customer reviews, annual fees, precious metals selection, storage options, promotions, and buy-back programs. You can request a free guide/kit from each company by clicking on the “GET FREE KIT!” button to the right.
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| Company | Reviews | Annual Fees | Investment Minimums (IRA) | Preferred Custodian | Free Gold Kit |
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$180 | $25,000 | Equity Trust |  |
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$0 | $50,000 | Equity Trust | |
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$0 | $10,000 | Equity Trust | |
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$100 | $10,000 | Equity Trust | |
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$180 | $10,000 | Equity Trust | |
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$80 | $2,000 | Equity Trust | |
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About the Author
Stina is an entrepreneur who's passionate about personal finance, investing, and digital marketing. She's been a writer in this space for over a decade.
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