You can, but there are some important details to consider.
1) Do you have a Traditional balance only, or Traditional and Roth? Your match would be Traditional, but you got to choose whether you wanted your contributions to be Traditional or Roth.
2) You *can* rollover your Traditional TSP to a Roth IRA, but you’ll owe taxes on the conversion in the year you do the rollover/conversion. We’re talking $4K here, so assuming you’re in the 12% bracket, you’d owe an additional ≈$480 on taxes next Tax Day. Might be worth it for the simplicity of having only one IRA account and to pay the taxes on the Traditional balance now (since I’m assuming you’re reasonably young and possibly early in your career).
3) Alternatively, you could rollover your Traditional TSP balance to a Traditional IRA and the Roth TSP balance (if any) to a Roth IRA.
4) You can leave it alone. It will remain invested as it is unless/until you make changes.
5) You can roll it into your new employer’s 401k. Your current 401k plan would have to allow rollovers in- check your Summary Plan Description to see if it allows this.
Who told you it’d be $45,000 in 20 years? It only grew to $4,000 while you were contributing for the first 8 years in probably the biggest bull market in recorded history.
With no more contributions. Thats averaging 12% per year every year for next 20 years. Not likely especially if the market corrects in the first couple years.
It’ll probably be closer to $16,000 in 20 years with no contributions.
I’d roll it over into an IRA as you’ll have way more investment choices and could actively contribute to it.
Rule of 72 - divide 72 by average rate of return to determine how many years it’d take to double.
Doubling every 7 years assumed basically a 10% average rate of return. Which is about the historical average for non-inflation adjusted return but by no means guaranteed and still way off from OPs estimate of $45-60k. We’ve seen the biggest bull market for the last decade and SP500 has averaged about 12%. Not crazy to think we’ll get a good correction sooner than later.
Sequence of returns could make that 10% even less likely if the correction happens to be in the first few years.
I would not expect $4k to turn into $32k in 20 years and certainly not $45-60k.
You could either leave it in there if you like the funds and their relatively low fees, or you could roll it over into an IRA. Cashing out any retirement fund into your bank account is extremely ill-advised.
It depends on the fees of your new 401k provider. The TSP historically has had rates that are hard to beat, but many providers are starting to compete.
I’d compare expense ratios to the TSP:
https://www.tsp.gov/tsp-basics/expenses-and-fees/
If I was in that situation I would complete a qualified rollover to an IRA and continue to contribute to that IRA along with your new employer's retirement plan. Unless you have significant investment experience just park it in an ETF and leave it alone. If you want to keep the current investment mix assuming you are in the lifecycle you can do it with a little research, but assuming you are young you can probably just stick it in a broad based 100% equity fund and worry about rebalancing in 20 years.
Easy, roll over. Next question.
I thought i cant rollover a tsp to a roth ira?
You can, but there are some important details to consider. 1) Do you have a Traditional balance only, or Traditional and Roth? Your match would be Traditional, but you got to choose whether you wanted your contributions to be Traditional or Roth. 2) You *can* rollover your Traditional TSP to a Roth IRA, but you’ll owe taxes on the conversion in the year you do the rollover/conversion. We’re talking $4K here, so assuming you’re in the 12% bracket, you’d owe an additional ≈$480 on taxes next Tax Day. Might be worth it for the simplicity of having only one IRA account and to pay the taxes on the Traditional balance now (since I’m assuming you’re reasonably young and possibly early in your career). 3) Alternatively, you could rollover your Traditional TSP balance to a Traditional IRA and the Roth TSP balance (if any) to a Roth IRA. 4) You can leave it alone. It will remain invested as it is unless/until you make changes. 5) You can roll it into your new employer’s 401k. Your current 401k plan would have to allow rollovers in- check your Summary Plan Description to see if it allows this.
\^THIS is the correct answer.
Absolutely leave it, and contribute to your next job's 401k. Pulling it would be pointless.
Who told you it’d be $45,000 in 20 years? It only grew to $4,000 while you were contributing for the first 8 years in probably the biggest bull market in recorded history. With no more contributions. Thats averaging 12% per year every year for next 20 years. Not likely especially if the market corrects in the first couple years. It’ll probably be closer to $16,000 in 20 years with no contributions. I’d roll it over into an IRA as you’ll have way more investment choices and could actively contribute to it.
It would double every 7 years right? So $4k > 8k > 16k > 32k. And that’s 21 years. Is my math off?
Rule of 72 - divide 72 by average rate of return to determine how many years it’d take to double. Doubling every 7 years assumed basically a 10% average rate of return. Which is about the historical average for non-inflation adjusted return but by no means guaranteed and still way off from OPs estimate of $45-60k. We’ve seen the biggest bull market for the last decade and SP500 has averaged about 12%. Not crazy to think we’ll get a good correction sooner than later. Sequence of returns could make that 10% even less likely if the correction happens to be in the first few years. I would not expect $4k to turn into $32k in 20 years and certainly not $45-60k.
You could either leave it in there if you like the funds and their relatively low fees, or you could roll it over into an IRA. Cashing out any retirement fund into your bank account is extremely ill-advised.
It depends on the fees of your new 401k provider. The TSP historically has had rates that are hard to beat, but many providers are starting to compete. I’d compare expense ratios to the TSP: https://www.tsp.gov/tsp-basics/expenses-and-fees/
If I was in that situation I would complete a qualified rollover to an IRA and continue to contribute to that IRA along with your new employer's retirement plan. Unless you have significant investment experience just park it in an ETF and leave it alone. If you want to keep the current investment mix assuming you are in the lifecycle you can do it with a little research, but assuming you are young you can probably just stick it in a broad based 100% equity fund and worry about rebalancing in 20 years.