Can I Invest in TSP After I Get Out of the Army?

by Vicki A. Benge, studioD

The Thrift Savings Plan (TSP), offered to members of the armed services and federal workers in the United States, provides a means to save and invest for retirement. Investment products available within the TSP allow account holders to tailor risk tolerance with expected returns and invest for the long-term. The question of whether service members can continue contributing to a TSP account after discharge from the Army can be answered with a simple "yes" if the veteran returns to civilian life as a federal employee. Otherwise, restrictions apply to contributions.


The North American Military Financial Education Center calls the TSP the foundation of retirement for members of the military. This plan accepts both taxable and non-taxable contributions based on the type of pay from which the contribution is deducted. For example, combat zone and hazardous duty payments are tax-free income and retain that classification after being invested into the TSP and when the designated funds are withdrawn. Other contributions earn income on a tax-deferred basis, meaning withdrawals and distributions following retirement will be taxed at the prevailing rate. Individual retirement accounts (IRAs) can be rolled over into the TSP. Money moved into the TSP is not subject to any Internal Revenue Service (IRS) restriction.

Civil Service

The TSP offers special benefits to military veterans who return from active service to a position in the federal civil service. For example, retroactive contributions to the member's TSP account may be forthcoming and the account holder will be given the opportunity to make up on contributions not made while on active duty. In addition, if the account holder withdrew all the funds from a TSP account while on active duty, he will be given an opportunity to refund the retirement account; this must occur within 90 days of returning to civilian employment.

Private Industry

After discharge from the Army or any of the branches of the U.S. military, if a TSP account holder goes to work in private industry, regular contributions from a payroll account or regular salary are no longer an option. However, the veteran has other avenues through which to maintain and fund a TSP account after leaving government service if he has a TSP account balance of $200 or greater. Furthermore, the privileges of withdrawals and loans from a TSP account are terminated if the account holder leaves the military service or no longer qualifies as a federal civilian worker.

Transfers to TSP

Transfers and contributions to a TSP account made after the federal worker or military veteran leaves government service must be done from an established IRA or employer-provided retirement account. The rules regarding such deposits treat these transfers as employee contributions. The account holder maintains the right to choose how the funds are allocated within the TSP, but does not have all the leeway that an active service member retains. For example, if separated from military service, the TSP account holder must begin withdrawals in the year following separation from service or after reaching age 70 1/2, whichever happens last.

About the Author

Vicki A Benge began writing professionally in 1984 as a newspaper reporter. A small-business owner since 1999, Benge has worked as a licensed insurance agent and has more than 20 years experience in income tax preparation for businesses and individuals. Her business and finance articles can be found on the websites of "The Arizona Republic," "Houston Chronicle," The Motley Fool, "San Francisco Chronicle," and Zacks, among others.

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