The Thrift Savings Plan (TSP)

Written by Carson Hamill CIM^®, CRPC^®, Associate Portfolio Manager and Assistant Branch Manager & Dean Moro BComm, CIM^®, Associate Portfolio Manager

Planning for retirement is a significant aspect of your financial well-being, especially for federal government employees and uniformed services members. The Thrift Savings Plan (TSP) is a powerful tool designed to help these individuals secure their financial future. In this blog, we'll dive into what the TSP is, how it works, and whether these plans can be transferred to a rollover IRA when you leave your employer.

• What Is a Thrift Savings Plan (TSP)?
• How Does a Thrift Savings Plan (TSP) Work?
• What Thrift Savings Plan (TSP) Offers
• Can You Roll Your Thrift Savings Plan (TSP) into an IRA?
• Moving to Canada with a Thrift Savings Plan (TSP)?

What Is a Thrift Savings Plan (TSP)?

The Thrift Savings Plan (TSP) is a retirement investment program designed exclusively for federal employees and uniformed service members, including the Ready Reserve. It functions as a defined-contribution plan (DCP) and provides federal employees with benefits similar to those commonly available in the private sector. The TSP is overseen by federal employees who are also participants in the program, operating under the Federal Retirement Thrift Investment Board (FRTIB).

A TSP closely mirrors the structure of a 401(k) plan commonly provided by private employers, delivering comparable savings and tax benefits to what many private corporations offer their employees.

How Does a Thrift Savings Plan (TSP) Work?

TSP operates as a defined contribution plan. Your retirement income from the TSP hinges on three key factors:

• Your Contributions: The amount you contribute during your working years
• Earnings: The returns your investments generate over time
• Agency or Service Contributions: If eligible, contributions from your employer

The TSP is managed by federal employees who are also participants, ensuring a vested interest in its success. It falls under the oversight of the Federal Retirement Thrift Investment Board (FRTIB).

What Thrift Savings Plan (TSP) Offers

The TSP prides itself on serving those who serve their country. Their mission is simple: to prioritize your best interests and provide the tools and information you need to define and achieve your specific retirement goals.

The Thrift Savings Plan (TSP) provides a restricted selection of mutual fund choices. Although these funds come with cost-efficiency, they might not encompass the diverse investment options that a client might desire. Once you become eligible, transferring your TSP into a rollover IRA could present a more favorable alternative. We recommend consulting with your cross-border financial advisor or accountant to explore the best options for your situation. Click here to learn more.  

Can You Roll Your Thrift Savings Plan (TSP) Into An IRA?

Yes, if you have parted ways with the employer who established your TSP, you are eligible to transfer your TSP to a rollover IRA.

Moving to Canada with a Thrift Savings Plan (TSP)?

If you have relocated from the United States to Canada with a thrift savings plan, you have options:

1. Leave the TSP as is
2. Transfer your TSP to a Rollover IRA
3. Withdraw the TSP and pay U.S. and Canadian taxes

If you decide to maintain your TSP with the current administrator, make sure to verify whether it's permissible to have a Canadian address on the account. Click here to learn more.

If you are interested in transferring the TSP to a rollover IRA, it's advisable to work with  a dual-licensed cross border financial advisor. Since a TSP closely mirrors a 401(k) plan, there are distinct advantages to transferring it to a rollover IRA. This rollover IRA permits greater flexibility in the active management of your investments, eliminates restrictions, and expands your investment choices. Equally significant, it simplifies matters for your beneficiaries and offers advantages for estate planning.

Next Steps

If you’re planning on moving to Canada and need assistance with your investments, estate planning, and portfolio management, please call or email us at Snowbirds Wealth Management as we specialize in cross-border financial planning and wealth management. We work closely with experienced cross-border lawyers and accountants to ensure you have a team behind you.

About Snowbirds Wealth Management

Gerry Scott is a portfolio manager and founder of Snowbirds Wealth Management, an advisory firm focussed on the cross-border market. Together with Dean Moro and Carson Hamill, associate financial advisors and assistant branch manager with Snowbirds Wealth Management, they provide investment solutions for Americans living in Canada, and Canadians residing in the United States. Licensed in both Canada and the US, they provide tailored investment solutions to minimize the tax burden when moving assets across borders.

To schedule an introductory call, please click here.

Statistics and factual data and other information are from sources RJLU believes to be reliable but their accuracy cannot be guaranteed. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities nor is it meant to replace legal, accounting, taxation or other professional advice. We are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters. The information is furnished on the basis and understanding that RJLU is to be under no liability whatsoever in respect thereof. 

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