Retirement Roadmap: What Every Fed Needs to Know About TSP & Beyond

March 6, 2025

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TSP After Federal Service: What You Need to Know Before You Retire

For federal employees approaching retirement, one of the biggest financial decisions involves their Thrift Savings Plan (TSP). Many Feds wonder what happens to their TSP after they leave government service and what their options are moving forward. Jim Kaplan, Director of External Affairs at the Federal Retirement Thrift Investment Board, sits down with Francis to share key insights about the updated TSP fact sheet and how departing employees can make informed choices about their retirement savings.

Federal employees and military personnel do not have to close their TSP accounts when they retire or leave government service. Instead, they can keep their accounts open and continue benefiting from the plan’s low fees and long-term growth potential. Kaplan explains that the TSP’s newly updated fact sheet, Information for TSP Participants Leaving Federal Employment, is designed to make these details clearer and more accessible.

This fact sheet answers many of the most common questions from departing employees. What happens to existing loans? Can participants still move money into their TSP accounts? What withdrawal options are available? Kaplan notes that these concerns typically arise through TSP’s call centers and online inquiries, and the goal of the fact sheet is to provide easy-to-find, straightforward guidance.

One of the biggest misconceptions people have is about TSP loans. If a participant has an outstanding loan, they can continue making payments, but they must set up a direct payment schedule since payroll deductions will no longer apply. Alternatively, they can choose to pay off the loan in full. Participants also have the option to roll funds into their TSP accounts from other qualified retirement plans, even after leaving federal service.

Kaplan highlights the importance of staying informed, particularly when it comes to tax implications and required minimum distributions (RMDs). Every year, TSP issues over 1.3 million 1099-R forms, and the call centers typically see a surge in questions about taxes and RMDs in January. The good news? TSP proactively tracks participants who are subject to RMDs and ensures they receive the necessary funds to avoid tax penalties.

Beyond these updates, Kaplan discusses broader enhancements to TSP services, including an upcoming in-plan Roth conversion option that will allow participants to move traditional TSP funds into a Roth account while keeping them within the plan. Additionally, TSP is exploring AI-driven customer service improvements to streamline participant interactions and provide quicker, more accurate responses to inquiries.

With a 94% satisfaction rate and a call center where 82% of calls are answered within 20 seconds, the TSP continues to prioritize participant experience. Kaplan encourages all federal employees—whether they’re years away from retirement or preparing to leave now—to stay engaged with their accounts, review TSP’s latest resources, and plan ahead.

You can find the new TSP Fact Sheet here