How To Use Your TSP When You Retire and The Options You Have

In the event of my retirement, what should I do with my Thrift Savings Plan (TSP)? The majority of inquiries from people who are getting close to retirement revolve around this very question.

The answer is “it depends,” which should be no surprise. Let’s simplify things by classifying the options into three categories so we can compare and contrast them more easily.

First Choice: The Thrift Savings Plan Annuity

Retirement benefits from the TSP differ from those from the Federal Employees Retirement System (FERS). Your TSP will continue to provide you with a lifetime income stream after you transfer your fund to an insurance company like Met Life.

Combinations of an immediate annuity include: 

  • Life only 
  • Life with period certain
  • A Life with Remainder
  • Joint life

The highest payout comes from a life-only immediate annuity. An individual’s monthly annuity payment will decrease proportionally as a more significant number of add-ons are purchased. You might receive $3,000 per month from life only annuity, but only about $2,700 per month from a joint-life annuity.

The above-mentioned immediate annuity choices all involve the participant giving up access to their TSP balance. After the insured’s death, the beneficiary of life with a remainder annuity would receive the remaining balance (the initial purchase amount minus the monthly payments).

The primary advantage of an immediate annuity is that it provides a lifetime stream of guaranteed income. But as a retiree under FERS, you already have two guaranteed income sources: your annuity and Social Security. Therefore, giving up access to your investments might not be necessary to ensure the rest of your income.

Advantages: 

  • Income is guaranteed for life

Disadvantages:

  • Inability to access principal
  • Linked to the level of interest rates
  • Decrease in purchasing power due to inflation

Second Choice: Keep Funds in TSP

You can continue contributing to your TSP after you stop working, just as you did while employed. The main differences are (1) the inability to make new contributions and (2) the inability to take out loans against the account. Aside from that, you have the same access to your account balance and investment choices as you did when you were employed.

Access to your TSP funds before age 59½ is a significant perk of leaving money there for retirement. Access to your TSP is immediate and penalty-free if you retire at 55 or later. 

Advantages:

  • You can use your TSP the same way you did before.
  • You can access your G fund.
  • Money access is quicker than an IRA, and there are no penalties for withdrawing early.

Disadvantages:

  • You only have five options for investments.
  • Potential problems with beneficiaries.
  • You have no control over the account from which you are making a withdrawal.

Third Choice: Rollover to an Individual Retirement Account

You can transfer the TSP to an individual retirement account (IRA)  the transfer to an IRA, in whole or part, can be made free of taxation. If you want to cash out some or all of your TSP funds, you can submit form TSP 70 or TSP 77.

Transferring funds to an IRA has some positive outcomes. The primary advantage of an IRA is the sheer breadth of investment opportunities available to you.

One advantage of converting to an IRA is accessing your money whenever possible. Also, retirees with an IRA can cash out their savings from any investment they want. This is an excellent option for retirees using the barbell or bucket strategy. An IRA gives you more freedom in how and when you take money out of your account.

The last perk concerns any potential heirs your offspring may have. If a TSP account holder dies, a surviving spouse can set up a Beneficiary Participant Account (BPA) to continue contributing to the TSP. After a spouse passes away, the surviving beneficiary or beneficiaries must access the TSP account to claim the funds.

Advantages:

  • A wider variety of investment opportunities.
  • Investment withdrawals are more adaptable.

Disadvantages:

  • Restrictions on using the G-Fund.
  • Limitations on eligibility before age 59½.
  • If you withdraw all your funds from the TSP, they cannot be returned.

Contact Information:
Email: mark.heinrich@grfci.com
Phone: 9187441333

Bio:
Mark, a lifelong Tulsan graduated from Westminster College, Fulton, Missouri with a Bachelor of Arts in Accounting. Mark served in the United States Army as a Captain in the 486th Civil Affairs BN. Broken Arrow, Oklahoma and retired in 1996. Mark is married to his high school sweetheart Jenny and has four beautiful children. Mark’s passion for his work, which includes over 20 years in the Financial Industry started as an Oklahoma State Bank Examiner. Mark examined banks throughout Oklahoma gaining a vast knowledge and experience on bank investments, small business and family investments. Mark’s experiences include being formally trained by UBS Wealth Management, a global investment firm where he served as a Financial Consultant specializing in Wealth Management for individuals & families. Mark is a licensed Series 24 and 28 General Securities Principal and an Introducing Broker Dealer Financial Operations Principal. Additionally, Mark is a Series 7 and 66 stockbroker and Investment Advisor focusing on market driven investments for individuals, businesses and their families. Mark specializes in providing financial knowledge, ideas, and solutions for federal employees, individuals, families and businesses. We serve as your advocate, and assist you in the design and implementation of financial strategies while providing the ideas to maximize your security and wealth. Our goal is to give you maximum control of your financial future. We provide the expertise to help you with personal issues such as: practical tax Ideas, risk management, investment solutions, and estate preservation. Additionally, we’ve counseled hundreds of employees on their transitions from careers in federal government, and private industry to their next life stage, whether that is retirement or a second career. We specialize in devising strategies that roll your TSP, 401(k), pension plan, to a suitable IRA to meet your objectives.

Disclosure:
Securities offered through GRF Capital Investors, Inc., 6506 South Lewis Avenue, Suite 160 Tulsa, OK 74136 Phone: 918-744-1333 Fax: 918-744-1564 Securities cleared through RBC Capital Markets, LLC. 60 South 6th St., Minneapolis, MN 55402 Member FINRA www.finra.org / SIPC www.sipc.org Broker Check http://brokercheck.finra.org/

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Mark, a lifelong Tulsan graduated from Westminster College, Fulton, Missouri with a Bachelor of Arts in Accounting. Mark served in the United States Army as a Captain in the 486th Civil Affairs BN. Broken Arrow, Oklahoma and retired in 1996. Mark is married to his high school sweetheart Jenny and has four beautiful children. Mark's passion for his work, which includes over 20 years in the Financial Industry started as an Oklahoma State Bank Examiner. Mark examined banks throughout Oklahoma gaining a vast knowledge and experience on bank investments, small business and family investments. Mark’s experiences include being formally trained by UBS Wealth Management, a global investment firm where he served as a Financial Consultant specializing in Wealth Management for individuals & families. Mark is a licensed Series 24 and 28 General Securities Principal and an Introducing Broker Dealer Financial Operations Principal. Additionally, Mark is a Series 7 and 66 stockbroker and Investment Advisor focusing on market driven investments for individuals, businesses and their families. Mark specializes in providing financial knowledge, ideas, and solutions for federal employees, individuals, families and businesses. We serve as your advocate, and assist you in the design and implementation of financial strategies while providing the ideas to maximize your security and wealth. Our goal is to give you maximum control of your financial future. We provide the expertise to help you with personal issues such as: practical tax Ideas, risk management, investment solutions, and estate preservation. Additionally, we've counseled hundreds of employees on their transitions from careers in federal government, and private industry to their next life stage, whether that is retirement or a second career. We specialize in devising strategies that roll your TSP, 401(k), pension plan, to a suitable IRA to meet your objectives.

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