What Happens to My TSP When I Die?

How is your TSP account handled after you pass away? Filling out this one form is very important to ensure it is handled according to your wishes.

A federal employee can contribute to the Thrift Savings Plan (TSP) throughout a federal career. The TSP is a retirement savings account for federal employees and is an important part of a FERS (Federal Employees Retirement System) retirement plan.

A federal employee may contribute a significant portion of savings into the TSP over the years. This leads many to ask an important question, “What happens to my TSP when I die?” Considering death is never an enjoyable task but is one that is necessary to make sure your money ends up in the right hands after your passing.

Have you filed Form TSP-3?

TSP-3 is the form used by the Thrift Savings Plan to designate a beneficiary. The form allows you to designate “one or more persons, a trust, a corporation, your estate, or another legal entity (including a foundation or charity) as the beneficiary(ies) of your account.” TSP-3 also gives you the option of designating a contingent beneficiary—a secondary beneficiary in case the first passes away before the federal employee or retiree.

If you pass away first and your spouse is a beneficiary, a beneficiary participant account will be established in your spouse’s name. The TSP beneficiary participant account will be allocated into the Lifecycle fund that aligns with your spouse’s age and will be maintained by TSP as long as there is $200 or more in the account. From there, your spouse will have the ability to reallocate, withdraw, or make a variety of decisions regarding the TSP beneficiary participant account.

Please note that reviewing your beneficiaries is an incredibly important task as the TSP-3 is a legally binding document that the TSP must follow. If you get divorced, remarried or have another significant life event, don’t forget to update TSP-3 to make sure the right people will be taken care of at the time of your death.

What happens if I do not file TSP-3?

If you don’t file TSP-3, your account will be distributed by the order of precedence. The order of precedence outlined below is taken directly from TSP.gov’s handbook on the topic.

  1. To your spouse
  2. If none, to your child or children equally, with the share due any deceased child divided equally among that child’s descendants
  3. If none, to your parents equally or to your surviving parent
  4. If none, to the appointed executor or administrator of your estate
  5. If none, to your next of kin who is entitled to your estate under the laws of the state in which you resided at the time of your death

When considering what will happen to your money after your death, one must first ask, “What do I want to happen with my money?” After answering this question, you can follow the steps above to achieve that goal.

Disclosure: The information contained in these blogs should not be used in any actual transaction without the advice and guidance of a tax or financial professional who is familiar with all the relevant facts. The information contained here is general in nature and is not intended as legal, tax or investment advice. Furthermore, the information contained herein may not be applicable to or suitable for the individuals’ specific circumstances or needs and may require consideration of other matters. RBI is not a broker-dealer, investment advisory firm, insurance company, or agency and does not provide investment or insurance-related advice or recommendations. Brandon Christy, President of RBI, is also president of Christy Capital Management, Inc. (CCM), a registered investment advisor.

About the Author

Brandon Christy, CPA, PFS, is the founder and president of Retirement Benefits Institute, Inc. He is an established leader in contracted federal retirement benefits education, and his company has trained over 10,000 federal employees to help them gain clarity and confidence in retirement.