Rolling over your Thrift Savings Plan (TSP) to a Fidelity 401(k) can be a significant step in consolidating your retirement savings and potentially gaining access to a wider range of investment options. This lengthy guide will walk you through the process, step by step, ensuring you understand the nuances involved.
Thinking About Your Future? Let's Unlock Your Retirement Potential!
Have you been considering what to do with your TSP account now that you've left federal service, or perhaps you're just looking for more control and diverse investment opportunities? Moving your TSP to a Fidelity 401(k) could be a fantastic solution! While the process might seem a bit daunting at first, breaking it down into manageable steps makes it much clearer. Let's get started on securing your financial future!
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| How To Transfer Tsp To Fidelity 401k |
The Grand Journey: Transferring Your TSP to a Fidelity 401(k)
Transferring retirement funds is a common practice, but it's crucial to understand the specifics when moving from a government-sponsored plan like the TSP to a private employer's 401(k) administered by Fidelity. This process is generally known as a "rollover."
Step 1: Understanding the 'Why' and the 'What' - Your Initial Considerations
Before diving into the paperwork, it's essential to understand why you're considering this move and what type of TSP funds you have. This will directly impact the subsequent steps and potential tax implications.
Why Roll Over Your TSP?
More Investment Choices: The TSP offers a limited selection of funds (G, F, C, S, I, and L Funds). A Fidelity 401(k) typically provides a much broader array of mutual funds, ETFs, and other investment vehicles, allowing for greater portfolio diversification and customization to your risk tolerance and financial goals.
Consolidation: If you have multiple retirement accounts from various employers, rolling your TSP into your current Fidelity 401(k) can simplify your financial life. Managing one account is often easier than tracking several.
Professional Management (Optional): Many 401(k) plans, including those administered by Fidelity, offer access to financial advisors or managed account services that can help you construct and maintain a suitable investment portfolio.
Flexibility (Post-Employment): While the TSP does offer withdrawal options after leaving federal service, rolling into a 401(k) can sometimes provide different or more convenient distribution choices depending on the plan's rules.
Understanding Your TSP Account Type: Traditional vs. Roth
It's critically important to distinguish between a Traditional TSP and a Roth TSP, as the tax treatment during a rollover is different.
Traditional TSP: Contributions are made with pre-tax dollars, and earnings grow tax-deferred. When you roll this over, it should go into a Traditional 401(k) to maintain its tax-deferred status and avoid immediate taxation.
Roth TSP: Contributions are made with after-tax dollars, and qualified withdrawals in retirement are tax-free. If you have Roth TSP funds, they must be rolled into a Roth 401(k) to preserve their tax-free growth and withdrawal benefits. Rolling Roth TSP into a Traditional 401(k) would trigger immediate taxation.
Action Point: Take a moment to log into your TSP account or review your statements to confirm whether you have a Traditional TSP, a Roth TSP, or a combination of both. This information is paramount for a smooth and tax-efficient rollover.
Tip: Don’t rush — enjoy the read.
Step 2: Preparing Your Fidelity 401(k) for the Incoming Funds
Before you initiate any action with the TSP, you need to ensure your Fidelity 401(k) is ready to receive the rollover. This usually involves contacting your employer's plan administrator or Fidelity directly.
Confirm Eligibility and Plan Rules
Contact Your HR/Benefits Department: Start by speaking with your Human Resources or Benefits department at your current employer. They are the primary contact for your company's Fidelity 401(k) plan.
Inquire About Rollover Acceptance: Ask if your company's Fidelity 401(k) plan accepts rollovers from external plans like the TSP. Most employer-sponsored 401(k)s do, but it's essential to confirm.
Understand Rollover Procedures: Your HR representative or Fidelity (if they are the direct contact for rollovers) will explain the specific steps and forms required by their end. They might have an "Incoming Rollover Contribution Form" or similar documentation.
Identify Receiving Account Type: Reiterate whether you have Traditional TSP or Roth TSP funds (or both). Ensure they can accommodate the correct type of rollover (Traditional to Traditional, Roth to Roth). If you have both, you might need to initiate separate rollover processes or ensure the Fidelity 401(k) can segregate the pre-tax and after-tax amounts.
Gather Necessary Information from Fidelity
You will likely need specific information about your Fidelity 401(k) plan to provide to the TSP. This typically includes:
Plan Name and Number: The official name and unique identification number of your employer's 401(k) plan.
Custodian/Trustee Name: Fidelity Investments Institutional Operations Company LLC (FIIOC) is often the custodian for 401(k) plans.
Custodian's Address: The mailing address where the TSP will send the rollover check.
Your Fidelity 401(k) Account Number: This is your individual account number within the plan.
Routing Instructions (if applicable): While direct rollovers usually involve a check, some institutions might have electronic transfer capabilities. Confirm with Fidelity.
Pro Tip: When speaking with Fidelity or your HR, have a pen and paper ready to jot down all the details. Request any forms or instructions to be sent to you via email or mail.
Step 3: Initiating the Rollover from Your TSP Account
This is where you directly engage with the TSP to request the distribution of your funds for rollover purposes. There are generally two methods: Direct Rollover (highly recommended) and Indirect Rollover (generally discouraged due to tax implications).
Option A: Direct Rollover (The Recommended Path!)
A direct rollover means the TSP sends the funds directly to your Fidelity 401(k) administrator. You never physically receive the money. This method avoids tax withholding and potential penalties.
Access TSP Withdrawal Forms: You'll typically need to complete a TSP withdrawal request form. The most common forms for separated participants are:
Form TSP-70: Request for Full Withdrawal (if you want to roll over your entire TSP balance).
Form TSP-77: Request for Partial Withdrawal (if you only want to roll over a portion of your balance).
You can usually access these forms on the TSP website (tsp.gov) under the "Forms & Publications" section, or by contacting the ThriftLine.
Completing the Form:
Identify as a "Direct Rollover": On the TSP form, ensure you indicate that this is a direct rollover to an eligible employer plan (a 401(k) in this case).
Provide Fidelity 401(k) Information: Carefully fill in all the details you gathered in Step 2:
Name of the Receiving Plan (Your Employer's 401(k) Plan)
Name of the Receiving Institution (Fidelity Investments Institutional Operations Company LLC or similar)
Address of the Receiving Institution
Your Account Number at Fidelity
Indicate whether it's a Traditional TSP or Roth TSP rollover.
Specify Amount: Clearly state the amount you wish to roll over. If it's your entire balance, indicate "entire balance."
Signature and Dates: Ensure all required signatures and dates are present.
Spousal Consent (Crucial!): If you are married, federal law generally requires spousal consent for TSP withdrawals/rollovers unless your spouse has previously waived their rights. Make sure your spouse signs the necessary section of the form in the presence of a notary public. Failing to obtain proper spousal consent is a common reason for delays or rejection.
Submitting the Form: Send the completed and signed TSP form, along with any required supporting documentation (e.g., proof of separation from service if requested), to the TSP Service Office. The mailing address is typically provided on the form itself. You might consider using certified mail with a return receipt for tracking purposes.
Option B: Indirect Rollover (Use with Extreme Caution!)
Tip: Reread tricky sentences for clarity.
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In an indirect rollover, the TSP sends you a check directly, and you are then responsible for depositing the full amount into your Fidelity 401(k) within 60 days.
Mandatory 20% Tax Withholding: The TSP is required by law to withhold 20% of the taxable portion of your distribution for federal income tax if they send the check to you directly.
The 60-Day Rule: You must deposit the full amount of the distribution (including the 20% that was withheld) into your Fidelity 401(k) within 60 days of receiving the check. If you fail to deposit the full amount, the withheld portion (and any portion not rolled over) will be considered a taxable distribution and may be subject to a 10% early withdrawal penalty if you're under age 59½. You would then need to make up the 20% from other personal funds to complete the full rollover and avoid immediate taxation.
Single Indirect Rollover Rule: You are generally allowed only one indirect rollover from an IRA or retirement plan within a 12-month period.
Recommendation: Avoid indirect rollovers unless absolutely necessary and you fully understand the tax implications and the strict 60-day deadline. The direct rollover method is almost always preferable.
Step 4: Monitoring the Transfer and Confirming Receipt
Once you've submitted your TSP withdrawal request, the waiting game begins. It's important to actively monitor the process.
TSP Processing Time
The TSP typically processes withdrawal requests within a few weeks. The exact timeframe can vary depending on their current volume.
You can often track the status of your request by logging into your TSP account online or by calling the ThriftLine.
Fidelity's Role in Receiving Funds
Expect a Check: In most direct rollovers, the TSP will issue a physical check made payable to "Fidelity Investments Institutional Operations Company LLC FBO [Your Name]" (For the Benefit Of Your Name) and mail it to Fidelity.
Fidelity Processing: Once Fidelity receives the check, they will process it and deposit the funds into your 401(k) account. This can also take several business days.
Confirm with Fidelity: After a reasonable period (e.g., 2-3 weeks after submitting your TSP request), contact Fidelity's 401(k) support or check your NetBenefits account online to confirm that the funds have been received and deposited. Provide them with your account number and mention you are expecting a rollover from TSP.
Important: If you chose an indirect rollover and received a check, deposit it into your Fidelity 401(k) immediately! Do not delay, as the 60-day clock starts ticking the moment you receive the check.
Step 5: Investing Your Rolled Over Funds at Fidelity
Once the funds land in your Fidelity 401(k), the transfer isn't truly complete until you've allocated those funds into investments.
Review Your Investment Elections
Default Investments: Be aware that some 401(k) plans have a default investment option (e.g., a target-date fund) where rolled-over money might initially be placed if you haven't specified otherwise.
Make Active Choices: Log into your Fidelity NetBenefits account and navigate to your investment options. You'll want to select specific funds that align with your financial goals, risk tolerance, and time horizon.
Consider Professional Guidance: If you're unsure about investment choices, consider utilizing any advisory services offered through your Fidelity 401(k) or consulting with a financial advisor.
QuickTip: Scan for summary-style sentences.
Updating Your Beneficiaries
While your TSP beneficiary designations will not transfer to your Fidelity 401(k), it is crucial to update your beneficiaries on your new Fidelity account. This ensures your assets are distributed according to your wishes in the event of your passing.
Final Check: Review your Fidelity 401(k) statement or online account to ensure the rolled-over amount is correct and invested as you intended. Keep records of all communications, forms, and confirmations related to the rollover.
Frequently Asked Questions (FAQs)
Here are 10 related FAQ questions to help clarify common concerns about rolling over your TSP to a Fidelity 401(k):
How to initiate a direct rollover from TSP to a Fidelity 401(k)?
You initiate a direct rollover by completing TSP Form TSP-70 (Full Withdrawal) or TSP-77 (Partial Withdrawal), clearly indicating it's a direct rollover to an eligible employer plan, and providing your Fidelity 401(k) plan's custodian information and account number.
How to find my Fidelity 401(k) account number and routing information for a TSP rollover?
Your Fidelity 401(k) account number can be found on your statements or by logging into your Fidelity NetBenefits account. For routing and custodian information, contact your employer's HR/Benefits department or Fidelity's 401(k) customer service.
How to avoid taxes and penalties when transferring TSP to Fidelity 401(k)?
To avoid taxes and penalties, always choose a direct rollover where the TSP sends the funds directly to Fidelity. If you receive a check (indirect rollover), you must deposit the full amount (including any withheld taxes) into your Fidelity 401(k) within 60 days.
How to determine if my TSP funds are Traditional or Roth?
Tip: Don’t skim — absorb.
Log into your TSP account online or review your TSP statements. They will clearly indicate whether your contributions are Traditional (pre-tax) or Roth (after-tax).
How to handle spousal consent for a TSP rollover?
If you are married, spousal consent is generally required for TSP withdrawals/rollovers. Your spouse must sign the relevant section of the TSP withdrawal form, often requiring notarization.
How to track the status of my TSP rollover request?
You can typically track the status of your withdrawal request by logging into your TSP account on tsp.gov or by calling the ThriftLine (1-877-968-3778).
How to invest my TSP funds once they are in my Fidelity 401(k)?
Once the funds are in your Fidelity 401(k), log into your Fidelity NetBenefits account. You'll need to select specific investment funds from the options available in your employer's plan to allocate your rolled-over money.
How to update beneficiaries after rolling over my TSP to Fidelity 401(k)?
After the rollover is complete, log into your Fidelity NetBenefits account and navigate to the beneficiary designation section. It is essential to update your beneficiaries for your new Fidelity 401(k) account.
How to contact TSP customer service for rollover questions?
You can contact the TSP ThriftLine at 1-877-968-3778. Their website (tsp.gov) also has a wealth of information and forms.
How to decide if rolling over TSP to Fidelity 401(k) is the right choice for me?
Consider your investment preferences, desire for consolidation, access to financial advice, and the fees and investment options of both the TSP and your Fidelity 401(k). If unsure, consulting with a qualified financial advisor is highly recommended.
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