What Happens to Your TSP When You Leave
Spoiler: it's still yours — and it may be your best retirement asset
Your Thrift Savings Plan balance is permanently yours — regardless of when you separate from military service. This is one of the most misunderstood aspects of military benefits.
When you leave the military, your TSP account stays exactly where it is. You have four options: leave the money in TSP (which has expense ratios of 0.055% — among the lowest of any retirement plan in existence), roll it into a civilian employer's 401(k), roll it into a traditional or Roth IRA, or withdraw it (though withdrawals before 59½ typically incur a 10% early withdrawal penalty plus income taxes).
For most separating service members, keeping the money in TSP is the best option. The fees are extraordinary — 0.055% means you pay just $5.50 per year for every $10,000 invested. Most civilian 401(k) plans charge 0.5%–1.0%, which is 10–20x more expensive.
Spoiler: it's still yours — and it may be your best retirement asset
Critical vesting detail: if you're under BRS and separate before completing two years of service, you forfeit the government's automatic 1% and matching contributions (your own contributions remain). After two years, all government contributions are fully vested.
Typical TSP balances for consistent 5% contributors: 4 years: $15,000–$25,000. 8 years: $60,000–$100,000. 12 years: $120,000–$200,000.
Left in the TSP growing at historical average returns of ~7% annually, a $100,000 balance at age 30 could reach $760,000 by age 60 — without any additional contributions. That's the power of compound growth in a low-fee environment.
One more thing: TSP offers both traditional (pre-tax) and Roth (after-tax) options. For most military members, the Roth TSP is advantageous because military income is relatively low (especially with tax-free allowances), meaning your current tax rate is likely lower than your future retirement tax rate.