TSP vs IRA Calculator 2026

The case for keeping money in TSP

When federal employees leave government service, they routinely get pitched to roll their TSP into an IRA. The pitch is usually about investment flexibility and advisor access. What often goes unsaid: rolling out of TSP means giving up the G Fund permanently.

The G Fund is a unique instrument. It pays the average yield of Treasury securities with four-plus year maturities while guaranteeing the principal. In 2024, that was around 4.9%. In 2025, approximately 4.5%. No equivalent exists in the IRA universe. Money market funds and stable value funds exist, but they carry different risks and typically earn less. Giving up the G Fund to access slightly more investment options is often a bad trade.

The expense ratio argument also favors TSP. At 0.06%, the TSP charges less than virtually any comparable investment account in the country. A low-cost Vanguard IRA running index funds might run 0.03% to 0.15% in fund expenses. The difference over 20 years compounds, but it's not large. The G Fund is the stronger argument.

When the IRA wins

Two situations push toward the IRA. First: investment options. TSP offers five core funds plus lifecycle L Funds. An IRA at Fidelity or Vanguard gives you access to thousands of funds including sector funds, REITs, international small-cap, and alternatives. If you have a specific investment strategy that requires options TSP doesn't carry, the IRA provides them.

Second: Roth flexibility. The TSP now offers a Roth option, but Roth IRA has advantages the Roth TSP does not. Roth IRAs have no required minimum distributions (RMDs) at any age during the owner's lifetime. The Roth TSP is subject to RMDs starting at 73 under current rules (you can roll to Roth IRA to avoid this). Roth IRA contributions can also be withdrawn tax-free and penalty-free at any time, which gives younger savers flexibility the TSP lacks.

The separation from service rule

Federal employees who separate from service at 55 or later can withdraw from TSP without the 10% early withdrawal penalty. This is the same provision that applies to 401(k) plans, and it is one of TSP's strongest advantages for early retirees. A FERS employee who reaches their Minimum Retirement Age of 57 and immediately retires can draw on TSP without penalty.

An IRA does not have this provision. IRA withdrawals before 59.5 are subject to the 10% penalty unless you use Substantially Equal Periodic Payments (SEPP/72(t) distributions), which lock you into a fixed withdrawal schedule for five years or until 59.5, whichever is later. The TSP separation rule is simpler and more flexible.

The practical implication: if you plan to retire between 55 and 59.5, keep enough in TSP to cover your bridge income needs. Don't roll it all to an IRA and then discover you can't access it without penalty.

Traditional TSP vs Roth IRA

Many federal employees who hold traditional TSP in the 22% or 24% bracket are good candidates for a Roth IRA alongside it. The traditional TSP contribution is a current-year tax deduction. The Roth IRA contribution provides tax-free growth. In retirement, drawing on both gives you the ability to control your taxable income precisely, filling lower brackets with TSP withdrawals and using Roth funds for spending above the tax-optimal threshold.

The Roth IRA income limit is $150,000 for single filers and $236,000 for married filers in 2026. Backdoor Roth conversions are available for higher earners, though the mechanics require careful handling if you have other traditional IRA balances.

The right answer for most federal employees

Contribute enough to TSP to get the full agency match. After that, fund a Roth IRA up to the annual limit ($7,000 in 2026, $8,000 at 50+). If you can save beyond the IRA max, put the rest back into TSP, with enough in the G Fund to cover your sequence-of-returns risk in early retirement. This three-account approach, FERS pension plus TSP plus Roth IRA, gives you guaranteed income, tax-deferred growth, and tax-free flexibility in retirement.