TSP vs. 401(k): Key Differences Federal Employees Need to Know

TSP is often called "federal's 401(k)," and technically that's accurate — both are defined-contribution plans governed by the same sections of the Internal Revenue Code. But the two accounts differ in ways that matter significantly for federal employees switching to the private sector, private-sector employees joining the government, and anyone deciding what to do with an old 401(k) balance.

Quick comparison

Expense ratios: where TSP has a durable edge

The TSP's core fund expense ratios run 0.034–0.054% — roughly $3.50 per $10,000 invested per year.² The Investment Company Institute found that 401(k) participants paid an average of 0.26% on equity mutual funds in 2024.³ That's a 5–7× difference on the same underlying asset class.

On a $600,000 TSP balance, the cost difference is about $1,320/year. Compounded over 20 years at 7% annual growth, the gap approaches $55,000 in lost wealth — just from fees.

Investment options: TSP has fewer, but covers everything that matters

TSP has 5 core funds (G, F, C, S, I) plus Lifecycle (L) funds. A large 401(k) might offer 20–50 investment options; a brokerage window plan might offer thousands.

In practice, the 5 TSP funds cover the major asset classes: short-term government bonds (G), aggregate bonds (F), U.S. large-cap equity (C), U.S. mid/small-cap equity (S), and international equity (I). The C+S combination approximates a total U.S. market index. Adding I Fund provides global diversification. L Funds automate the allocation with a glide path.

The one thing 401(k) plans consistently can't offer is the G Fund — and for federal retirees, that's often the most important missing piece.

The G Fund: something no 401(k) can replicate

The G Fund is a special-issue Treasury security that earns the weighted-average yield of approximately 202 marketable Treasury securities with four or more years to maturity — but is redeemable at par. You get intermediate-term Treasury yields without the price volatility that comes from actually holding those bonds in a fund.

In 2022, when rising interest rates sent the F Fund down 13%, the G Fund gained 2.9%. As of April 2026, the G Fund yields approximately 4.3% annualized. Nothing in the 401(k) universe matches this combination: a bond fund that doesn't lose principal when rates rise.

Stable-value funds in some 401(k) plans are the closest analog, but they carry insurance wrap costs (typically 0.15–0.40%), credit risk on the insurance provider, and yield less than the G Fund. They are not the same.

If you're considering rolling your TSP to an IRA or a new employer's 401(k), this is the asset you're giving up permanently. See the full analysis: TSP G Fund: The Investment No IRA Can Replicate.

Rule of 55 — same law, one important TSP difference

IRC §72(t)(4) allows penalty-free withdrawals from both TSP and 401(k) plans if you separate from service in the calendar year you turn 55 or later. The rule is identical for both account types — with one exception unique to TSP.

For law enforcement officers, firefighters, and air traffic controllers under FERS, IRC §72(t)(10)(B) extends penalty-free TSP access to age 50 (with 20 years of qualifying service) or any age with 25 years.⁴ No private-sector 401(k) equivalent exists for this provision.

The practical trap for federal employees: if you roll your TSP to an IRA, you lose the Rule of 55 protection on that money. The IRA treats those funds as ordinary IRA assets — taxable plus 10% penalty for distributions before 59½. This is the most common costly mistake made at federal separation. See: TSP Withdrawal Options and Rule of 55.

Roth options: TSP caught up in January 2026

TSP has offered a Roth option since 2012. What it lacked until recently was an in-plan Roth conversion: the ability to convert traditional (pre-tax) TSP balance to Roth without first leaving TSP.

TSP launched in-plan Roth conversions on January 28, 2026.⁵ You can now convert up to 26 times per year, minimum $500 per conversion. This fills the main gap that previously made rolling to an IRA more attractive for Roth conversion planning. Many private-sector 401(k) plans still don't offer in-plan Roth conversions.

One shared rule under SECURE 2.0 § 603: if your prior-year FICA wages exceeded $150,000, all catch-up contributions must go to Roth — this applies to both TSP and 401(k) plans with catch-up contributions starting in 2026.

Rolling a 401(k) into TSP: when it makes sense

TSP accepts incoming rollovers from traditional 401(k), 403(b), governmental 457(b) plans, and traditional IRAs.⁶ TSP does not accept Roth rollovers — a Roth 401(k) or Roth IRA cannot be rolled into TSP.

Why would you roll an old 401(k) into TSP rather than out to an IRA?

• G Fund access. Once your balance is in TSP, you can allocate any portion to the G Fund — including the rolled-in assets.
• Rule of 55. If you're still employed and plan to retire at 55+, rolling old 401(k) money into TSP brings it under Rule of 55 protection. An IRA rollover doesn't have that protection.
• Simplified management. One account versus multiple — TSP as the consolidation hub.
• Fees. If your old 401(k) has high-cost funds, moving to TSP's 0.035% funds is a clear upgrade.

How to do it: Log into your TSP account at tsp.gov and use the Move Money feature (rollover concierge service or self-service under My Account). Then initiate a direct rollover from your 401(k) custodian to TSP — never receive the check yourself, as the custodian will withhold 20% for taxes in an indirect rollover.

TSP accepts rollovers whether you're currently employed in federal service or have already separated (as long as your TSP account is still open and not fully distributed).

Can you roll TSP into a new employer's 401(k)?

In theory, yes — most 401(k) plans can accept incoming rollovers from TSP. In practice, not all plan documents allow it, and the process requires your new employer's plan to explicitly accept TSP rollovers.

Before rolling TSP to a new employer's 401(k), ask: does the new plan have a G Fund equivalent? Does it have comparable fees? Will the Rule of 55 still apply? In most cases, you're better off leaving the TSP account open, starting fresh contributions to the new employer's 401(k), and managing both. TSP accounts can remain open indefinitely after separation until you choose to distribute or until Required Minimum Distributions start.

Decision framework for federal employees in transition

Use this as a starting framework, not a final answer — your specific numbers matter:

• Staying in federal service? Maximize TSP contributions to capture the full 5% agency match. Roll any old private-sector 401(k) into TSP if it's traditional, especially if you want G Fund access or the Rule of 55 to cover those assets.
• Leaving federal service before age 55? Don't automatically roll TSP out. The Rule of 55 won't apply in either account at that age, but keeping TSP open preserves future G Fund access and lower fees. Compare the new employer's 401(k) costs and fund quality before deciding.
• Leaving federal service at age 55 or later? This is when TSP's Rule of 55 is most valuable. If you need income in the gap before age 59½, TSP withdrawals are penalty-free; IRA withdrawals are not. The partial-rollover strategy — moving Roth conversion candidates to an IRA while keeping withdrawal income in TSP — often beats either extreme.
• LEO, firefighters, or ATC separating at 50+? Your Rule of 50 is unique. Don't roll TSP to an IRA until you fully understand that you're permanently forfeiting penalty-free access that starts at 50 — not 55 — under the TSP.

For the full TSP stay-vs-rollover analysis: TSP Stay vs. Rollover: The Complete Decision Guide.

1. 2026 elective deferral limit $24,500 for 401(k) and TSP; catch-up (50–59, 64+) $8,000; super catch-up (60–63) $11,250: IRS.gov — 401(k) limit increases to $24,500 for 2026; TSP Bulletin 25-3 — 2026 Contribution Limits.
2. TSP net administrative expense ratio ~0.034%; total fund expense ratios (including investment costs) range 0.034–0.054% across the G/F/C/S/I funds: TSP.gov — Expenses and Fees. 2026 ratios had not been published at time of writing; ratios have been stable year-over-year.
3. Average equity mutual fund expense ratio incurred by 401(k) plan participants was 0.26% in 2024, down from 0.76% in 2000: Investment Company Institute — Mutual Fund Expense Ratios Remain at Historic Lows (July 2025). Individual plan costs vary widely; large employers with Vanguard/Fidelity/Schwab index funds may match TSP fees.
4. Rule of 50 for qualifying public safety employees (LEO, firefighters, ATC) with 20+ years of qualifying service: IRC §72(t)(10)(B); TSP Bulletin 15-4 — Public Safety Employees' Early Withdrawal Exemption. SECURE 2.0 further extended to 25-year service regardless of separation age.
5. TSP in-plan Roth conversion launched January 28, 2026: TSP Bulletin 25-4 — Launch of Roth In-Plan Conversion Feature. Minimum $500 per conversion; maximum 26 conversions per year; irrevocable once processed.
6. TSP accepts incoming rollovers from traditional 401(k), 403(b), governmental 457(b), and traditional IRAs: TSP.gov — Move Money Into the TSP. Roth rollovers not accepted.

Values verified as of June 2026. Contribution limits, expense ratios, and G Fund rates update annually; confirm at tsp.gov and irs.gov before acting.