Rolling over your Thrift Savings Plan (TSP) into a Self-Directed Individual Retirement Account (SDIRA) can offer greater investment flexibility, allowing you to diversify your retirement portfolio beyond traditional assets. Here’s a comprehensive guide to facilitate this transition:

1. Assess Your Retirement Objectives

Begin by evaluating your current retirement strategy. Determine whether the broader investment options available through an SDIRA align with your financial goals and risk tolerance. SDIRAs permit investments in alternative assets such as real estate, precious metals, and private equity, which can enhance portfolio diversification. (veteran.com)

2. Understand Your Rollover Choices

You have two primary rollover methods:

• Direct Rollover: The TSP transfers funds directly to your SDIRA custodian, preserving the tax-deferred status of your assets and avoiding immediate tax implications.
• Indirect Rollover: The TSP disburses funds to you, and you must deposit them into your SDIRA within 60 days. This method carries potential tax withholding and penalties if not executed correctly. (finra.org)

3. Select the Appropriate IRA Type

Decide between a Traditional SDIRA and a Roth SDIRA:

• Traditional SDIRA: Contributions are tax-deferred, with taxes applied upon withdrawal during retirement.
• Roth SDIRA: Contributions are made post-tax, allowing for tax-free withdrawals in retirement.

Rolling over from a traditional TSP to a Traditional SDIRA maintains tax deferral, whereas converting to a Roth SDIRA will incur taxes on the transferred amount. (finra.org)

4. Choose a Qualified SDIRA Custodian

Identify a reputable SDIRA custodian that supports your desired investment types. Ensure they have a solid track record, transparent fee structures, and responsive customer service. The custodian will manage administrative tasks and ensure compliance with IRS regulations.

5. Initiate and Complete the Rollover Process

• Open an SDIRA Account: Establish your SDIRA with the chosen custodian.
• Submit TSP Withdrawal Request: Complete Form TSP-70, specifying a direct rollover to your SDIRA. Ensure all sections are accurately filled out and obtain any necessary spousal consent. (veteran.com)
• Coordinate with Your Custodian: Provide your SDIRA custodian with the completed TSP-70 form and any additional documentation they require.
• Monitor the Transfer: Stay in contact with both the TSP and your SDIRA custodian to confirm the successful transfer of funds.

6. Diversify Your Investments

Once the rollover is complete, collaborate with your custodian to explore and invest in alternative assets that align with your retirement objectives. Ensure all investments comply with IRS regulations to maintain the tax-advantaged status of your SDIRA.

Important Considerations:

• Due Diligence: Conduct thorough research on potential investments, as SDIRAs offer access to both traditional and alternative assets. Understand the risks and benefits associated with each investment type.
• Prohibited Transactions: Be aware of IRS rules regarding prohibited transactions to avoid penalties. For instance, certain transactions involving disqualified persons are not allowed. (veteran.com)
• Consult Professionals: Engage with financial and tax advisors to ensure the rollover aligns with your overall retirement strategy and to navigate any complex tax implications.

By carefully executing a rollover from your TSP to a Self-Directed IRA, you can take greater control of your retirement savings and tailor your investment portfolio to better meet your financial goals.

uDirect IRA Services, LLC is here to help you build your retirement savings.  We are not a fiduciary and we do not offer tax or legal advice. We do not recommend specific investments, rather we guide you through the process to self-direct your retirement savings into assets you choose.  To get started, we offer a free consultation. Schedule yours HERE –  To open an account, click HERE.