TSP to Gold IRA: How to Convert a TSP Rollover to Gold
TSP funds can be used to diversify your retirement in precious metals through a Gold IRA. As long as you are eligible, federal employees and members of uniformed services can invest in physical gold and silver using the funds from TSP accounts. Rather than directly investing gold, the TSP assets must be rolled over from the TSP to a self-directed Gold IRA.
Gold IRA Planners makes it easy for federal workers by breaking down how to start a TSP rollover to gold in our guide below, from start to finish.
What is a TSP & Can It Hold Gold?
A Thrift Savings Plan (TSP) is a retirement savings plan for federal workers, government retirees, and members of the military, that can be rolled over into a Gold IRA. A TSP is a defined-contribution plan for federal employees with limited investment options as only lifecycle funds (L Funds) are allowed, including government securities. Like other employer-sponsored plans, TSPs limit the investment options you can hold.
It is not possible to invest physical gold or other precious metals in a Thrift Savings Plan (TSP). Even indirect exposure through gold mining companies in stocks or mutual funds is not permitted. Instead, you must roll over funds from your TSP to a Gold IRA by opening a self-directed IRA. A TSP gold investment is only possible through an SDIRA structure.
TSP Rollover to Precious Metals: How It Works
Federal employees can roll over their Thrift Savings Plan (TSP) into a Gold Individual Retirement Account (IRA) after separating from federal service or reaching age 59½. To begin, TSP funds must be transferred into a self-directed IRA that allows for physical gold holdings. Form TSP-70 is required for a full withdrawal, while Form TSP-77 is used for a partial rollover. The process typically takes up to two weeks from initiation to funding the Gold IRA. You're not required to roll over your entire TSP balance with partial rollovers being allowed, giving you more flexibility to diversify. A Gold IRA company will help in initiating the process of moving TSP funds to a self-directed individual retirement account.
Deciding how much of your TSP to allocate into a Gold IRA depends on your investment goals, but typically you'll see 5-20%. Speaking with your financial advisor is best to determine the portion of your TSP to invest in gold.
In-Service Rollovers for TSPs
In-service withdrawals from a TSP are limited. Those aged 59½ or older may be able to take an age-based in-service withdrawal, which can be rolled over into a Gold IRA. Financial hardship withdrawals are typically not allowed for a rollover.
How Are TSP Withdrawals Taxed During a Rollover?
TSP withdrawals rolled over directly into a Gold IRA are not taxed at the time of the rollover (a direct rollover or trustee-to-trustee transfer). However, if you receive the funds directly (an indirect rollover), the TSP is required to withhold 20% for federal income taxes. To avoid taxation and penalties, deposit the entire amount (including the withheld 20%) into the new IRA within 60 days. These tax implications apply to federal government workers and military personnel and must be followed to avoid a tax penalty when funding a Gold IRA with your TSP. Penalty-free withdrawals from a TSP to gold are possible, but should be conducted with your financial advisor following all rules in Gold IRAs.
How to Convert a TSP to a Gold IRA
To convert a TSP to a Gold IRA, first select a Gold IRA company to start the process of opening a physical Gold IRA. Then, start a TSP rollover to move your TSP funds to your new Gold IRA, selecting gold bullion coins and bars. IRA-approved precious metals like silver, platinum, and palladium bullion are also allowed in a self-directed Gold IRA once TSP funds are moved.
1. Open a Self-Directed Gold IRA
First, open a self-directed IRA with a Gold IRA company. This account will hold the gold and silver you purchase using your TSP funds and is required to hold gold in retirement.
2. Rollover TSP Funds
Next, rollover your TSP funds to the new self-directed Gold IRA. There are two options to move TSP funds to the SDIRA, either a direct or indirect rollover. A direct rollover is by far the most common method, allowing you to convert TSP funds without the risk of penalties. An indirect rollover allows you to take possession of your TSP funds with a 60-day window to reinvest them in the Gold IRA. Keep in mind an indirect rollover with your TSP funds triggers a 20% federal tax withholding, which must be replaced to finish the rollover.
3. Purchase IRS-Approved Gold & Silver
Once the self-directed Gold IRA is funded with your TSP, you can purchase IRS-approved gold and silver to include in the account. The Gold IRA company you work with will help you choose gold, silver, platinum, and palladium products that are IRA-allowed including coins and bars.
Costs to Move TSP Funds to Gold
The fees paid in a TSP rollover vary depending on the Gold IRA company. You can expect costs in Gold IRAs to include the setup fee, annual maintenance fees, storage fees, and rollover/transfer fees. Some companies provide zero-fee Gold IRAs to government workers, allowing you to maximize your TSP retirement savings in precious metals by reducing investment costs.
Gold vs TSP's G Fund & C Fund
Both G and C Funds in a TSP are paper assets with different risk profiles, while gold is a physical asset often used as a hedge against inflation and currency risk. The G Fund is low-risk, backed by U.S. Treasury securities, and provides modest, stable returns. While the C Fund tracks the S&P 500, offering higher growth potential with market volatility as a factor.
Unlike the income-generating G and C Funds, gold does not produce interest or dividends, federal employees use it outside the TSP as part of diversification strategies through a Gold IRA account.
Gold IRA Companies Best for TSP Account Holders
Not all Gold IRA companies have the same experience with a TSP. It's important to choose one of the best Gold IRA companies for TSPs, depending on what's right for you. These companies will help you roll over your TSP and work with custodians and depositories to secure your new Gold IRA. Precious Metals IRAs are set up with a specialized company who can help you use your TSP funds to fund it.
Before Rolling Over Your TSP, Plan Ahead With Gold IRA Planners
Rolling over a Thrift Savings Plan to a Gold IRA requires careful planning. Gold IRA Planners provides the resources you need to plan your Gold IRA with confidence. Plan your retirement portfolio now, enjoy retirement later.