Ask The Experts: Money Matters

By Mike Miles

TSP, IRA and disability

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Q. I am almost 47 years old and have applied for disability retirement from my federal job. I have 27 years of federal service and am covered under FERS. It was my understanding that upon disability retirement, I will not be able to contribute to my Thrift Savings Plan account any longer and the funds would basically sit in TSP until I’m 59½ years old. For that reason, I’m considering rolling over my TSP to a traditional IRA, in which I can then make contributions to until I reach 59½. I’d like to know why leaving the funds with TSP would be better than rolling over to an outside IRA, upon which I can then continue to make contributions? I have six figures in my TSP and have no other retirement accounts. My objective obviously is to continue growing the funds.

A. The TSP has lower expenses and access to the G Fund – two advantages you won’t find anywhere else. The benefit of these advantages is the ability to create a portfolio with better risk-adjusted returns than you’ll find in an IRA.

You don’t need to roll your TSP over to an IRA to contribute to an IRA, however. Open an IRA at a discount broker and make your contributions to it. You can invest in low-cost index funds in the IRA and then, when you’re done contributing, you can transfer your IRA balance into your TSP account. That would be the smarter move.

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