1. Contribution Amounts (2024):  TSP allows $23,000 annual contributions while IRAs only allow $7,000.  Furthermore, TSP allows an additional ‘catch-up’ contribution of $7,500 starting the year you turn 50.  An IRA allows only $1,000 of additional ‘catch-up’ contributions.  Contribution amounts are only relevant while employed.  Once retired, you can no longer contribute to the TSP, however you will still have the ability to transfer a Traditional IRA into the TSP.

4. Different Asset Allocations for Roth & Traditional: The TSP does not allow you to have different asset allocations for your traditional & Roth; for example – you cannot have your Roth TSP allocated as 100% C fund and have your Traditional TSP allocated 100% G Fund.  An IRA allows you to be as specific with your allocation as you want.

5. Pro-Rata withdrawals: When requesting a withdrawal from your TSP, can you specify that you want your withdrawal to come only from your G fund and not your C fund?  No, you cannot.  The TSP will only disburse your money on a Pro-Rata basis. However, you can be as specific as you’d like when withdrawing from an IRA.

6. Ability to borrow against the funds:  You can’t borrow from an IRA but the TSP allows you to borrow against your funds while you are actively employed as a Fed. (maximum loan of $50k). (Theoretically, you can borrow from your IRA for 60 days, as IRAs allow a rollover window of 60 days.  This means, you can roll money out of an IRA, use it but make sure you return it within 60 days.)

8. Creditor Protection:  Creditors cannot touch your TSP (or other employer plans) but they can touch your IRA. (Most IRAs, however, have a bankruptcy protection up to 1.5M – meaning, you will not be forced to liquidate an IRA to pay back debts in the case of a Bankruptcy.)

However, with the TSP, you may access your money without penalty starting the year you turn age 55. This is known as the “Age 55 Rule.”  This age 55 leniency is only true if you separated from your employer at age 55 or later.  If you separated before age 55, or if you’re still employed at age 55, the age 55 rule doesn’t apply.  Public Safety employees (Law Enforcement, Fire Fighters) can access their TSP without penalty even earlier than age 55, if they separate with an immediate retirement.

In your IRA, the penalty is 50% of what you should’ve taken as your RMD.  In the TSP there is, in practice, no penalty.  Not because you don’t have to take an RMD, but because the TSP will automatically send you the RMD.  (On a historical note – before 2019, the TSP would’ve actually forfeited your entire account if you did not make a “full withdrawal election” by the date of the RMD.)

11.  RMDs if Still at Work.  In an IRA, the above RMD requirement and penalty apply even if you still are working.  However, in the TSP, the RMD requirement does not apply if you are still working for the Federal Government.  If you are working outside the Federal Government, you will need to take your RMDs even from your TSP.

12.  Cannot satisfy RMD with funds from the other type of account. You cannot satisfy a TSP RMD by taking the RMD amount from your IRA, and vis versa – you cannot satisfy an IRA RMD by taking a distribution from your TSP.  So, in this regard, Traditional IRAs and Traditional TSP share the same rule, but they are viewed as different funds.

The TSP does not allow you to do a QCD, meaning any distribution you take from the TSP and give to charity will be counted as taxable income.