Timely post, as I'm considering how best to handle my retirement accounts. Have any of the prior mil types on here broken the code on how best to handle the TSP?

Option 1: leave it alone; low fees, grows tax deferred, limited investment options

Option 2: roll it over; potentially higher fees, still grows tax deferred, expanded investment options, potential issues with tax exempt portion

I'm trying to figure out if the DPSP will accept the rollover and treat the tax exempt portion appropriately. The gal on the phone from Fidelity had no clue. I'm ultimately looking for a way to get the tax exempt portion (~21%) into a Roth account, without paying a ton of taxes on the non-exempt portion--will this method work with the DPSP (synopsis: put it all into a traditional IRA, then roll it into the 401(k) [leaving the tax exempt portion behind], then roll the IRA into a Roth IRA--I'm guessing this article may be dated, since I think the DPSP can handle after-tax rollover money)?

If the tax advantage of the Roth plus the expanded investment options outside the TSP add up to more than the amount of increased fees, it's a no-brainer for Option 2; if I'm going to get taxed on the whole amount, Option 1 is a non-brainer. I suspect the real answer is more complicated than either of those, though....

Opinions? Pitfalls?