Your TSP account stays with you after leaving the military — you do not lose it, and you do not need to take any immediate action. The balance continues to grow based on your existing fund allocations, and you can still change those allocations and move money between funds. What changes: you can no longer make new TSP contributions unless you become a federal civilian employee. Cashing out at separation can be costly — taxes, the 10% early withdrawal penalty if under 59½, and the permanent loss of tax-advantaged compound growth can take a large share of the account. Leaving the money in TSP or rolling it over are generally worth understanding before making any decision.
Can you still contribute to TSP after separation?
No — not unless you return to federal service. After leaving the military, your TSP account remains open and invested, but contribution access ends. You can still make interfund transfers and change your allocation between the G, F, C, S, and I funds. The account simply stops receiving new deposits.
Should you roll TSP into an IRA?
Rolling to an IRA gives you access to more investment options and potentially more flexible withdrawal arrangements. The tradeoff: TSP's expense ratios are among the lowest available — typically under 0.06% — and many IRAs or 401(k)s at civilian employers carry higher fees.
If you roll over, use a direct rollover: the TSP transfers money directly to the new account without you touching it. Taking a distribution payable to you instead of a direct rollover can create mandatory withholding, tight 60-day rollover deadlines, and tax and penalty risks if mishandled. A direct rollover — where TSP sends the funds directly to your new account — is generally the cleaner method.
Traditional TSP rolls to a traditional IRA (tax-deferred). Roth TSP rolls to a Roth IRA (tax-free on qualified withdrawal). Mixing them incorrectly creates a taxable event.
What if you take a cash withdrawal?
Early withdrawal before 59½ triggers ordinary income taxes on the distribution plus a 10% early withdrawal penalty. On a $50,000 TSP balance, that's potentially $12,500–$17,500 in taxes and penalties depending on your bracket — permanently lost, not available to compound over decades.
There are exceptions: certain separations after age 55, substantially equal periodic payments (72(t) distributions), and a few other scenarios allow penalty-free access before 59½. These rules are specific and worth verifying with TSP.gov or a tax professional before any distribution.
Roth TSP specifically
If you contributed to Roth TSP — especially during combat zone months when contributions came from tax-excluded pay — that balance carries exceptional long-term value. Qualified Roth withdrawals in retirement are tax-free. Cashing out a Roth TSP balance early forfeits not just the current balance but the decades of tax-free compounding that balance would have generated.
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Open Calculator →For how TSP works from enrollment through your military career, see TSP for Beginners: What Happens If You Never Change Your Settings.
Educational information about TSP after military service. Not investment or tax advice. Consult a financial advisor or tax professional before making rollover or withdrawal decisions.
