Making the Right TSP Decisions in Retirement 

SPORTS

Making the Right TSP Decisions in Retirement 

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Often, workers entering retirement think that they need to act with their TSP, but this isn’t always the case. In reality, you can leave the account active if you don’t need an immediate TSP or cash. Previously, retirees had until April 1 either after retirement or age 70 ½ (whichever is later) to start taking monthly payments or withdraw the balance. Now, this isn’t the case, due to adjustments made in 2019. Even after retirement and surpassing the age requirement, annuitants can keep their TSP accounts. 

 

Don’t worry, those who seek more diverse investment opportunities can still move their TSP across to another service. For example, you might want an ETF, stock, mutual fund, or bonds. However, it’s always best to speak with a financial professional for tailored advice. They will help you to understand the pros, cons, and impact on your financial health. 

 

Important Considerations 

 

Two popular reasons to keep your TSP account are: 

 

  • Low admin fees 
  • Earning potential 

 

With the former, experts say that the fees in private sector funds can almost double compared to what you pay with a TSP. Also, retirees who want to eliminate risk can choose the G Fund. With this Government Bond Fund, you don’t have to worry about market fluctuations and losing money in retirement. Over the last ten years, the compounded historical yield for the G Fund is a little over 4.90%. With other funds, they carry market risks but generally also have a very good return.

 

Available for CSRS employees, the TSP has always offered great value when it comes to retirement income. Though the government doesn’t match contributions, you can defer taxes on all earnings and contributions. Meanwhile, FERS employees enjoy the TSP alongside the FERS Basic Annuity and Social Security. The reason TSP is important for FERS employees is that it doesn’t affect Social Security benefits and helps to calculate the FERS Basic Annuity (in a more attractive way than for CSRS annuities). 

 

 

Withdrawing from a TSP 

 

Back in September 2019, withdrawal options were adjusted, and retirees now have more flexibility. For example, you can do the following: 

 

  • Full withdrawal through monthly payments, a single payment, or a life annuity 
  • Partial withdrawal through a single payment 

 

However, the options don’t end there because you can also choose a mixed withdrawal (a combination of options). For instance, the TSP can transfer an amount to a traditional IRA. Using a TSP Transfer Form, you can also move it across to an employer plan. An ETF (electronic funds transfer) can also send payments directly into a savings or checking account. 

 

New Rules 

 

What are the new withdrawal rules? For anybody over age 59 ½, the TSP now allows several age-based post-separation and in-service partial withdrawals. Also, there’s more control over where funds come from – traditional balance, Roth balance, or a mix. 

 

For those who have left the federal world behind, you can now choose annual or quarterly payments rather than just monthly payments. What’s more, you control when payments start, pause, or change. As noted, you also don’t need to fully withdraw after reaching age 70 ½. 

 

In-Service Withdrawals 

 

As the name suggests, in-service withdrawals are taken while still working in federal employment. Before even considering an age-based or financial hardship withdrawal, remember to explore all other avenues first. If you take in-service withdrawals now, this will affect your life in retirement. For FERS workers, your TSP is an important component of retirement benefits. If you take in-service withdrawals, this could impact your comfort later in life. 

 

If necessary, speak with a financial professional to fully understand the consequences of your actions. If you’re over age 59 ½, you can make a single age-based withdrawal of over $1,000. Keep in mind the following: 

 

  • You can only do this once 
  • It removes your right to partial withdrawals in retirement 

 

If you want to transfer all or some of your TSP account, keep in mind that you’ll need to put it into an employer plan, traditional IRA, or Roth IRA. Additionally, all funds will enter one account rather than spreading between several. 

 

What if you want the funds in multiple accounts? First, use the TSP-75 form to transfer it to one of the accounts. From here, you then have more control over where you send money. 

 

Roth and IRA Accounts

 

Likewise, you can move funds the other way and transfer funds from an account to the Roth or traditional balance of your TSP. To process this, all you need is an open TSP account with funds. This being said, you cannot roll over funds or transfer them into a beneficiary participant account. 

 

If you need more information, head over to the TSP website – you’ll find plenty of resources and all the forms you need!

 

As the name suggests, in-service withdrawals are taken while still working in federal employment. Before even considering an age-based or financial hardship withdrawal, remember to explore all other avenues first. If you take in-service withdrawals now, this will affect your life in retirement. For FERS workers, your TSP is an important component of retirement benefits. If you take in-service withdrawals, this could impact your comfort later in life. 

 

If necessary, speak with a financial professional to fully understand the consequences of your actions. If you’re over age 59 ½, you can make a single age-based withdrawal of over $1,000. Keep in mind the following: 

 

  • You can only do this once 
  • It removes your right to partial withdrawals in retirement 

 

If you want to transfer all or some of your TSP account, keep in mind that you’ll need to put it into an employer plan, traditional IRA, or Roth IRA. Additionally, all funds will enter one account rather than spreading between several. 

 

What if you want the funds in multiple accounts? First, use the TSP-75 form to transfer it to one of the accounts. From here, you then have more control over where you send money. 

 

Roth and IRA Accounts

 

Likewise, you can move funds the other way and transfer funds from an account to the Roth or traditional balance of your TSP. To process this, all you need is an open TSP account with funds. This being said, you cannot roll over funds or transfer them into a beneficiary participant account. 

 

If you need more information, head over to the TSP website – you’ll find plenty of resources and all the forms you need!

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