Updated: August 29, 2026
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Most consumer articles on Thrift Savings Plan rollovers show one exit door: a Traditional or Roth IRA at Vanguard or Fidelity, and the article ends there. The tax code is broader. Under Internal Revenue Code Section 402(c) and the TSP participant book tspbk26 (Withdrawing From Your TSP Account), a separated participant can direct the balance to four distinct destination categories. Each has different receiving rules, different asset menus, and different downstream tax mechanics.
This page documents what the destination landscape actually looks like as of 2026. It does not recommend any category over another. The decision belongs to the participant and the participant’s tax or investment advisor. The purpose here is to make sure no eligible category is invisible when the participant sits down to fill out the withdrawal election form.
Destination 1: a Traditional IRA at any brokerage or bank
The Traditional IRA is the default destination for the pre-tax portion of a TSP balance (the Traditional TSP sub-account, plus the tax-deferred employer match on Roth TSP contributions). Any brokerage or bank that offers a Traditional IRA custodial account can receive a direct rollover from the TSP.
The mechanics are trustee-to-trustee. The TSP sends the funds directly to the receiving custodian. No 20 percent mandatory federal withholding applies. The 60-day rollover clock under IRS Publication 590-A never starts running because the participant never takes possession of the money.
The receiving IRA custodian issues Form 5498 for the rollover contribution the following year. The TSP issues Form 1099-R with code G in Box 7 (direct rollover). Box 2a (taxable amount) reads $0 for a Traditional TSP to Traditional IRA rollover. The pre-tax character of the money is preserved end-to-end.
Once inside the Traditional IRA, the balance follows Traditional IRA rules for contributions, distributions, and required minimum distributions under 26 U.S. Code Section 408. Investment menu is whatever the receiving custodian offers: mutual funds, exchange-traded funds, individual stocks and bonds, brokered CDs, and money market accounts at a full-service brokerage; a shorter menu at a bank IRA.
Destination 2: a Roth IRA (Roth TSP slice only)
The Roth IRA destination is available for the Roth TSP portion of the balance only. A direct rollover from Roth TSP to a Roth IRA is tax-free. The TSP issues Form 1099-R with code H in Box 7 (designated Roth direct rollover to a Roth IRA). Box 2a reads $0. Box 5 reports the designated Roth contribution basis that carries into the receiving Roth IRA.
One mechanic trips up participants who assume Roth TSP time in service counts on the Roth IRA side. It does not. The Roth TSP 5-year clock does NOT carry over to a Roth IRA. The Roth IRA has its own separate clock, which starts January 1 of the year of the participant’s first Roth IRA contribution or rollover, whichever came earlier. The tspbk26 booklet flags this explicitly.
A qualified (tax-free) distribution from the Roth IRA requires both conditions to be met: age 59.5 AND the Roth IRA 5-year clock satisfied. The mechanics of the two clocks and the split-rollover options under Notice 2014-54 are covered in the OPRS reference on the Roth TSP direct rollover and the 5-year clock.
The Traditional TSP portion of a mixed balance cannot go directly to a Roth IRA without being treated as a Roth conversion, which is a taxable event in the year of the conversion. That decision (whether to convert some or all of the Traditional TSP to Roth) is separate from the rollover decision and has its own tax planning implications.
Destination 3: a new employer plan (401(k), 403(b), or 457(b))
If a separated TSP participant takes new employment and the new employer’s retirement plan accepts rollover contributions, the TSP balance can move into that plan. The receiving plan must be a qualified plan under IRC Section 401(a) (private 401(k)), a 403(b) tax-sheltered annuity, or a governmental 457(b) plan.
Not every employer plan accepts rollovers in. The plan document controls. The participant must ask the new plan administrator two questions before submitting the TSP withdrawal election: does the plan accept incoming rollovers, and does it accept Roth designated rollovers separately from pre-tax rollovers. A yes to both is required for a full TSP transfer.
The trustee-to-trustee mechanics are identical to a TSP-to-IRA direct rollover. Code G on the 1099-R for the pre-tax portion; code H on a separate 1099-R for the Roth designated portion. No withholding, no 60-day clock, no current-year tax.
Participants sometimes keep balances in an employer plan for the “still working” RMD exception. If the participant continues working past age 73 and the current employer plan permits it, RMDs on that plan’s balance defer until separation. The exception does not apply to IRA balances.
It also does not apply to a former employer’s plan, including the TSP after separation. See the OPRS explainer on the RMD still-working exception for the mechanics.
Before moving to this destination, a participant should confirm the fee structure of the receiving plan (record-keeping, investment expense ratios) and its investment menu. Both are typically narrower than a self-directed IRA. Both are often narrower than the TSP itself.
Destination 4: a self-directed IRA at a custodian permitting alternative assets
A self-directed IRA is a Traditional IRA or a Roth IRA held at a custodian whose plan document permits alternative assets. The tax code treats it as an ordinary IRA under IRC Section 408. The label “self-directed” is a custodian-side distinction, not a separate IRA type in the statute.
The rollover mechanics from TSP to a self-directed IRA are identical to any other TSP-to-IRA direct rollover: trustee-to-trustee, no withholding, code G (Traditional) or code H (Roth) on the 1099-R, no current-year tax. The differences show up entirely on the receiving-IRA side: which custodian, which asset menu, which fee schedule, which reporting obligations.
Alternative assets a self-directed IRA can hold include real estate, private notes, private equity, and, under a specific statutory carve-out, certain precious metals. The IRA-owner cannot personally use the asset or transact with disqualified persons, or the entire IRA can be deemed distributed under the prohibited-transaction rules of IRC Section 4975.
How IRC 408(m)(3) permits precious metals inside a self-directed IRA
The general rule in 26 U.S. Code Section 408(m)(1) treats the acquisition of any collectible by an IRA as a distribution equal to the cost. Coins and metals fall into that general prohibition by default. Subsection 408(m)(3) then carves out two exceptions.
The first exception (408(m)(3)(A)) permits gold, silver, platinum, or palladium bullion of a fineness equal to or exceeding the minimum fineness a contract market requires for metals delivered in satisfaction of a regulated futures contract. In practice this maps to 0.995 for gold and platinum, 0.999 for silver, and 0.9995 for palladium under the standards of the Commodity Exchange Act’s regulated futures contracts.
The second exception (408(m)(3)(B)) permits certain gold, silver, and platinum coins listed in 31 U.S. Code Section 5112, which enumerates United States coins minted by the Secretary of the Treasury. American Eagle bullion coins in gold, silver, and platinum fall under this exception. A separate provision, IRC Section 408(m)(3), also incorporates coins from certain other jurisdictions when they meet the fineness standard of subparagraph (A).
Both exceptions require the bullion or coins to be in the physical possession of a trustee described in Section 408(a). In IRA practice this is enforced through a two-party arrangement: the self-directed IRA custodian holds legal title on behalf of the IRA, and an IRS-approved depository holds the physical metal. The IRA-owner does not take home delivery. Home storage of IRA-held metals has been rejected by the U.S. Tax Court and would trigger a deemed distribution.
What differs on the receiving-IRA side
A self-directed IRA holding precious metals has three cost centers a participant does not encounter at a Vanguard or Fidelity IRA. First, a custodian setup and annual administration fee. Second, an annual depository storage fee (segregated or commingled). Third, a dealer spread on each coin or bar purchase.
The dealer spread is the gap between the dealer’s sell price to the IRA and the same-day spot price of the metal. Custodian selection controls the setup and admin fee. Depository selection controls the storage fee. Dealer selection controls the spread.
These three decisions are distinct even though a single company sometimes bundles the workflow. OPRS-authored background on the process sits in the umbrella gold IRA rollover overview. The OPRS list of 27+ gold IRA dealers reviewed, with the currently trusted names highlighted, is on the gold IRA dealers to avoid page.
Side-by-side: how the four destinations compare on mechanics
| Destination | Trustee-to-trustee direct rollover | Withholding at rollover | 1099-R Box 7 code (Traditional slice / Roth slice) | Asset menu on the receiving side |
|---|---|---|---|---|
| Traditional IRA (brokerage or bank) | Yes | None | G / not applicable | Broad public market menu (funds, ETFs, stocks, bonds, brokered CDs) |
| Roth IRA (Roth TSP slice only) | Yes | None | Not applicable / H | Broad public market menu; Roth IRA 5-year clock applies |
| New employer plan (401(k), 403(b), 457(b)) | Yes | None | G / H | Plan-provided menu; still-working RMD exception may apply |
| Self-directed IRA at alternative-asset custodian | Yes | None | G / H | Alternative assets including IRC 408(m)(3) metals; extra fees |
The rollover form on the TSP side is the same regardless of destination
Once the participant selects a destination and confirms the receiving account is open and can accept the incoming direct rollover, the TSP withdrawal election form works the same way. The participant identifies the destination account (custodian name and account number) and instructs the TSP to send the funds trustee-to-trustee. The TSP does not evaluate or approve the destination; it simply follows the direct-rollover instruction.
Because the mechanics on the sending side are uniform, the destination decision is entirely a receiving-side question. It hinges on the asset menu the participant actually wants access to and the fee structure the participant is willing to pay.
Distribution features also matter: the still-working exception, systematic withdrawal options, in-kind distribution availability. Advisor input, if the participant chooses to seek it, closes out the analysis.
Rollover-destination flow at a glance
A note on what this page does not do
This page documents the destination landscape as authorized by the Internal Revenue Code and the TSP’s own participant booklet. It does not recommend one destination over another. Each destination category serves a different profile, and profile fit is a judgment that belongs to the participant, in consultation with the participant’s tax advisor or investment advisor.
TSP funds are securities. OPRS does not provide investment advice, does not recommend individual securities, and does not evaluate the suitability of any destination for any specific participant.
Historical context: the TSP was established under the Federal Employees’ Retirement System Act of 1986. Rollover mechanics between qualified plans and IRAs were expanded by the Economic Growth and Tax Relief Reconciliation Act of 2001. The SECURE Act of 2019 and SECURE 2.0 of 2022 refined them further. The four-destination landscape reflects the current law after those changes.
Last content review: August 29, 2026.
Frequently asked questions
Can a separated TSP participant leave the balance in the TSP indefinitely?
Yes, subject to the required minimum distribution rules. A separated participant can leave the balance in the TSP as long as the account balance is at least the TSP’s stated minimum (currently $200). Required minimum distributions apply starting at the RMD age under current law. Leaving the balance in the TSP is a fifth option distinct from the four rollover destinations documented on this page.
Can the balance be split across multiple destinations?
Yes. The TSP permits a partial rollover to one destination and either a residual TSP balance or an additional rollover to a different destination. Notice 2014-54 also permits allocating pre-tax and after-tax portions of a single rollover to different receiving accounts (Traditional IRA and Roth IRA respectively) in one coordinated instruction.
Does the destination decision change the 1099-R the participant receives?
The Box 7 code is the same across all four direct-rollover destinations documented here: G for the pre-tax slice, H for the Roth designated slice. Box 2a (taxable amount) reads $0 for a straight rollover. The receiving custodian issues Form 5498 the following year to document the incoming rollover on the receiving side.
Is a self-directed IRA a different tax structure than a regular IRA?
No. Under IRC Section 408, an IRA is an IRA regardless of the custodian’s plan document. “Self-directed” describes a custodian that permits a broader asset menu including alternative assets. The tax character, contribution rules, distribution rules, and required minimum distribution rules are the same as at any Traditional or Roth IRA custodian.
Where does the metals carve-out actually appear in the statute?
Subsection 408(m)(3) of Title 26, U.S. Code. Subparagraph (A) covers bullion of a specified fineness. Subparagraph (B) cross-references coins minted under 31 U.S. Code Section 5112. Both are exceptions to the general collectibles-as-distribution rule in 408(m)(1). The physical-possession requirement runs through the phrase “in the physical possession of a trustee” in the same subsection.
Sources cited
- TSP participant booklet tspbk26 (Withdrawing From Your TSP Account)
- 26 U.S. Code Section 408 (Individual Retirement Accounts, including 408(m)(3) metals carve-out)
- 31 U.S. Code Section 5112 (Denominations, specifications, and design of U.S. coins)
- IRS Publication 590-A (Contributions to Individual Retirement Arrangements, Chapter 1 on rollovers)
- 26 U.S. Code Section 402(c) (Rollovers of eligible rollover distributions)