Dave Says: Roll With It

Dear Dave,
The other day, my wife and I discovered a Thrift Savings Plan (TSP) we’d forgotten about for over 10 years from my time in the Army. There’s a little over $3,200 in there. We’re both in our thirties, and we’re trying to save up our starter emergency fund in Baby Step 1 of your plan. We were wondering if we should withdraw the money and use it toward Baby Steps 1 and 2, or just leave it in there.
Todd

Dear Todd,
The best thing to do is roll the money over into an IRA. Otherwise you’re going to be hit with a 10% penalty—plus your tax rate—and end up paying 30% to 40% of it to the government. That’s kind of like asking, “Would it be a good idea to borrow $3,200 at 30% interest to pay off debt?” Of course not! That would be a really dumb idea. And in a sense, that’s what you’d be doing by just taking the money out of the TSP.

It's not a ton of money, but conceptually, I hate the idea of giving the government 30% to 40% of my money just to get my money out. So yeah, do some research, find a good investment professional near you—one with the heart of a teacher—and roll it into an IRA.

Congratulations to you and your wife for deciding to take control of your money. And thank you for your service to our country, Todd. I hope this helped.
— Dave

* Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of “The Ramsey Show,” heard by more than 18 million listeners. He has appeared on “Good Morning America,” “CBS This Morning,” “Today,” Fox News, CNN, Fox Business and many more. Since 1992, Dave has helped people regain control of their money, build wealth, and enhance their lives. He also serves as CEO of Ramsey Solutions.