I left law enforcement with a $60,000 state pension earning 4%. Should I roll it to a Roth TSP instead?

A choice exists between keeping about $60,000 in a vested state law enforcement pension that guarantees 4% annually and rolling it into a Roth Thrift Savings Plan for a new federal job. The decision centers on inflation risk and long-term purchasing power rather than short-term safety. A guaranteed fixed rate can fall behind inflation over decades, especially when risk-free Treasury yields are near or above the guaranteed rate. Inflation measured by the Fed’s core PCE index rose from May 2025 to March 2026. Compounding shows that 4% growth over 20 to 25 years produces far less wealth than a higher long-run return such as 7% associated with a TSP portfolio with equity exposure.

"“Clay, this is about opening up your options.” Moss frames the decision as flexibility rather than simply maximizing a guaranteed rate. The key issue is that a fixed 4% return can become inadequate over long horizons if inflation rises. With decades before withdrawals, locking money into one rate can quietly reduce purchasing power, even if the nominal return looks safe on paper."

"“They're super low-cost options that can get you exposure to fight against inflation, whereas the guaranteed account's probably not going to do that over time.” Moss emphasizes that the Roth TSP provides diversified, low-cost investment exposure designed to help offset inflation. The guaranteed account lacks that inflation-fighting potential because its return is fixed. In a higher-rate environment, the guaranteed rate also compares unfavorably to what can be earned elsewhere with less complexity."

"“This seems logical to me and has a higher probability of greater returns in the future,” Clay said. The choice is presented as a forward-looking decision: rolling the vested pension into the Roth TSP that Clay contributes to in the federal job. The reasoning is that future returns are more likely to be higher with investment exposure than with a single guaranteed fixed rate that cannot adjust to changing economic conditions."

"“A 4% guarantee sounds safe, but if Clay is in his 40s with two or three decades before he draws on the money, locking $60,000 into a single fixed rate could quietly cost him six figures of purchasing power.” The stakes are described in purchasing-power terms rather than nominal dollars. The math compares compounding at 4% versus a higher long-run return such as 7%, showing large differences over 20 to 25 years. The conclusion is that inflation can erode the real value of a fixed-rate account."

Read at 24/7 Wall St.