TSP vs Civilian 401k

• Fees: TSP expense ratios are roughly 0.04-0.06% — among the lowest in the industry. The average civilian 401(k) charges 0.50-1.0%, and small-employer plans often exceed 1.5%. On a $200,000 balance over 25 years, a 0.5% fee difference costs about $35,000 in lost returns.
• Fund choice: TSP offers 5 core funds (G, F, C, S, I) plus L lifecycle funds — simple, diversified, hard to mess up. Civilian 401(k)s typically offer 15-30 funds with widely varying quality; many include high-fee active funds that should be avoided.
• Employer match: BRS provides up to 5% matching on TSP (1% automatic + up to 4% match). Civilian matches vary wildly — common ranges are 3% to 6%, sometimes with vesting schedules. Capture 100% of any match from day one; not doing so is leaving free money on the table.
• Roth option: both TSP and most civilian 401(k)s offer Roth. TSP previously limited Roth matching, but recent law changes allow Roth employer match — confirm your new employer's plan supports it.
• Contribution limits: identical for both ($23,000 in 2024, $30,500 if 50+). You can contribute to both in the same year as long as the total stays under the limit.

On fees alone, TSP is hard to beat. The civilian 401(k) wins on flexibility and (sometimes) match generosity.

• Leave it in TSP: simplest option, keeps the ultra-low fees, and preserves access to the G Fund (a unique fund with no civilian equivalent — government securities with positive real returns and no principal risk). Best default for most separating veterans.
• Roll into a Traditional IRA at a low-cost broker (Fidelity, Schwab, Vanguard): more fund choice, more flexibility on withdrawals (Rule of 55 doesn't apply to IRAs, but 72(t) does), and easier Roth conversions later. Loses access to the G Fund.
• Roll into the new employer's 401(k): only if the new plan has fees comparable to TSP and good fund choices. Most civilian plans don't — verify the all-in expense ratio first.
• Cash out: almost never the right move. You'll pay ordinary income tax plus a 10% early withdrawal penalty if under 59½, and you can't undo the loss of tax-deferred compounding. The only exception is small balances under $5,000 with specific hardship.
• Partial rollovers are allowed: you can move some funds to an IRA for Roth conversions while leaving the rest in TSP for the G Fund. Many veterans use this hybrid approach.

• Contribute at least enough to capture the full employer match on day one — even if you have to lower other spending temporarily. A 5% match is an instant 5% raise that compounds for 30 years.
• Choose Roth contributions if your current marginal tax bracket is 22% or lower (single income under ~$95k or married filing jointly under ~$190k in 2024). Veterans early in their civilian careers often qualify and benefit most from Roth.
• Audit the fund menu: prefer total-market index funds (S&P 500, total stock market, total international, total bond) with expense ratios under 0.10%. Avoid any fund over 0.50% unless it's the only diversified option.
• Check vesting schedules: some employers vest the match over 2-6 years. If you're likely to leave in under 3 years, the match may not fully follow you — factor this into job-change decisions.
• Increase contributions by 1% every year (or each raise) until you hit 15% of gross income, then aim for the $23,000 annual max. Most plans have an auto-escalation feature — turn it on.

Set it up correctly once, automate the increases, and the civilian 401(k) becomes a wealth machine that runs without your daily attention.

• Roth IRA: $7,000/year contribution limit (2024, $8,000 if 50+). Tax-free growth and tax-free withdrawals in retirement. Income limits apply ($161k single, $240k MFJ phase-out), but most newly transitioned veterans qualify.
• Backdoor Roth: if you're above the income limit, contribute to a Traditional IRA non-deductibly, then convert to Roth. Works cleanly only if you have no other pre-tax IRA balances (the pro-rata rule).
• Roth conversions from Traditional IRA or TSP: in any low-income year (a transition year, sabbatical, school years on GI Bill), convert pre-tax balances to Roth and pay the tax at your current low bracket — saving against a higher bracket in retirement.
• HSA (if you have a high-deductible health plan): triple tax-advantaged (deductible going in, growth tax-free, tax-free for medical), and the best retirement account most people never max. $4,150 individual, $8,300 family in 2024.
• Order of operations for most veterans: (1) 401(k) to the match, (2) HSA to the max, (3) Roth IRA to the max, (4) 401(k) to the federal max, (5) taxable brokerage. Adjust based on tax bracket and employer match generosity.

• Cashing out 'just for a year' to pay off debt or fund a transition. Beyond the tax and penalty hit, you lose 30+ years of tax-deferred compounding on that balance — the real cost of a $20,000 cash-out at age 30 is roughly $200,000 at age 65.
• Indirect rollover instead of direct (trustee-to-trustee) rollover. Indirect rollovers require you to redeposit within 60 days and trigger 20% mandatory withholding. Always request a direct rollover in writing.
• Rolling TSP into a high-fee insurance-company 401(k) or annuity. Many 'rollover specialists' are commissioned salespeople for products with 1.5-3% annual fees and surrender charges. Verify the expense ratio before signing.
• Mixing pre-tax and Roth balances in a single rollover. Pre-tax TSP must go to a Traditional IRA or pre-tax 401(k); Roth TSP must go to a Roth IRA or Roth 401(k). Crossing the streams creates a taxable mess.
• Forgetting about old 401(k)s and TSP balances at past jobs. Consolidate every 12-24 months — track them in one spreadsheet so nothing gets lost in a custodian merger or 'forced cash-out' on small balances.

A free 60-minute consultation with a fee-only fiduciary planner (NAPFA.org or feeonlynetwork.com) before any rollover decision is the highest-ROI hour of financial planning a transitioning veteran can buy.