Best Ways to Get Money Out of TSP in Retirement
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- เผยแพร่เมื่อ 23 ก.ค. 2024
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Use some of that TSP as soon as possible. Your best health and strength is now. Dont give it all away in your estate.
Wonderful again! Just today I asked TSP about installments when I retire so perfect timing! Thank you😊
Dallen, thank you for the excellent content and your cheery disposition. You help take the fear out of retirement planning! I am going to check if you have a video on the mysterious TSP-Roth divide and the odd ways it might differ from a for ex Fidelity Roth and a TSP account.
Thank you for the feedback. If it's any help, here is a link to our website with all our videos about the TSP (including ROTH TSP).
hawsfederaladvisors.com/tsp-investing-articles/
I went with option #2 Installment. I retired federal law enforcement age 51 - 2021. Although I haven't touched my TSP yet. I'm waiting until age 62. Plan is draw what ever gains for that year in December for the following year budget. If there no gains - no withdrawals. I'm living just fine with my DOJ pension and Veteran Affairs Compensation. The extra increase in social security benefits will be ❤.
Are you debt free?
@@itguru2037 Depends upon how you look at it. I have a mortgage on the house in America. I have enough cash in the bank or I can use savings bonds to pay off my debt. My bonds earnings are higher than my mortgage interest. Rather not trade cash for home equity. You don't build net worth you're only trading it. All other assets are paid off. House in the Philippines. No credit card debt but credit score 838 credit line of 145k. I use like a debit card, pay right after posting. Not car, personal loans or student loans since 2016. I lived off my DOJ income and saved my VA money the last 10 years of my career. Don't have cable TV or internet services outside of our phones. We do eat out and take friends out to eat. Don't smoke, drink alcohol or gamble. We don't keep up with the Jones. We use credit card rewards to travel. We don't lend money to family or friends anymore. Everyone survived without our help.
I have a mortgage for my house in America that I can completely pay off with cash. I don't want to trade cash equity for home equity. House rich but cash broke. My savings bonds interest gains is larger than my mortgage interest. No other debt. All credit cards are paid weekly. No students loans, car loans or personal loans.
@@b.coxemba6799 awesome. You live abroad? Does this make better sense financially to live abroad? I’m thinking about that too
Can you do a video on alternative options to the TSP to park your money in, during your retirement? I’m interested in comparing apples to apples. TSP, and its fees, vs the market and firms like Fidelity, etc.
Of course. We actually have tons of videos on whether people should rollover into an IRA after retirement. Here is the link to a great video about that:
th-cam.com/video/pdZ0v2ng_a8/w-d-xo.html&ab_channel=HawsFederalAdvisors
Keep in mind that more is withheld when doing a one time withdrawal than with a recurring withdrawal (20% VS about 10%). You can change your monthly withdrawal amount easily. And one time withdrawals are limited to one every 30 calendar days.
Thank you for clearing up the one time withdrawal. I was thinking only one time for life.
@@mikedv39 you can do that too, if you pull it all out.
@@mikedv39I also was thinking the same thing, mainly because I thought that the tax rate (20%) would be the same no matter how much was taking out. I have a lot of homework to do.
Great information! TSP doesn't even know you can take money out before 59
As always thank you for your continued support👍🏾❤️
You are so welcome
I retired almost 10 years ago. Started withdrawals tight away. I have taken out way more then i put in and still have about 81 % of what i started with
Wow, great to hear!
How did you manage that? Do you still have all of your funds in stocks?
@@bemusedobserver6476
I have a 70/30 split C Fund G Fund. i keep it simple.
I think you should be able to take it out once you leave federal service regardless of your age without the 10 percent robbery
So after 59 1/2 age set up your tsp to pay you how you want . Always keep control of your money, dont do an annuity
Yes exactly.
you don't have to wait until 59.5
@@bannertraveller5879 please let us know how we can get before 59.5
you can withdraw without the 10% penalty if you retire at 57, you can also look to work part time and earn up to around $24K and still collect your full FERS supplement without reduction - i might use this strategy so i can put off having to start withdrawing from my tsp and let it grow larger with interest
There are some good annuities, aren't there? I went to a workshop where with a fixed index annuity, the owner's monies go to the family upon the owner's death. I always thought that with all annuities, the insurer keeps all monies upon the owner's death--that is why I never liked annuities. I am going to have to do more homework.
Great video thank you! It would be neat if at the end of these videos if you would say what you plan to do for your situation when you retire So for this video, if you could say if you plan to take out $1,000 a month and not make any big withdrawals to avoid paying so much taxes, etc. That's what I plan to do, take $1K out every month but make adjustments if later I decide I don't need it :o)
Thanks for the Feedback!
Can i withdrawl a percentage for installment payments? Or does it have to be a dollar amount? From what i understand i can request from traditional vs Roth, but i cannot get only from specific fund, like G, correct?
Great questions! You can select either a percentage or a dollar amount with taking TSP withdrawals.
You can also select whether it comes from the Traditional or ROTH TSP account, but you cannot select which fund it comes from (G,F,C,S,I, etc.)
If you roll over some or all of your TSP into another IRA after you retire, I’m special category over 30 years service and retired at my MRA, are you then bound by the 59.5 rule since your no longer in the TSP? If not how do you prove that to your new IRA company? Thank you
Great question. The short answer is yes, you are bound by the 59.5 rule in an IRA. Here is a video for a more in depth answer:
th-cam.com/video/3SMXp0ztVIQ/w-d-xo.html&ab_channel=HawsFederalAdvisors
IF you meet the rule of 55 and take withdrawals at 57 will the 1099r show $$ as regular distributions or will you have to file 5329 with 1040 to claim exemption to 10% penalty?
This is a great question. If you would like future content to be on this topic, feel free to send this question through this link:
app.hawsfederaladvisors.com/question-submission
Dalon (sp)....my question is..... I have bothe a Traditional and a Roth TSP account.
Can I tell the TSP which account I want my money taken from, or does it get split evenly?
I'm planning on retiring at the end of 2024 and want the money to come from Traditional until my later years. Then I'll access the Roth....
No Dalon, but you can say wd from trad., roth, or pro-rated
*not*
Great question, like @LRB8558 said, you can select to withdraw money from either the ROTH TSP or Traditional TSP or from both. Here is an article that explains a little:
www.tsp.gov/making-contributions/traditional-and-roth-contributions/
When taking option #3 one time withdrawal, what is the tax on a $40k withdrawal?
Great question. If you are withdrawing from a traditional TSP account, any one-time withdrawal will be taxed.
Hmm,,,,just learned something. So as a (Law Enforcement) retirement eligible employee, age 50 with 24 years of service. I can with drawl from my TSP while still working and avoid the 10% penalty? I didn't know you could withdrawal before being retired.
Thanks for sharing! We're glad we could be of assistance to you.
@@PlanYourFederalBenefits According to TSP you can not with drawl until you are seperated from service (retired) but that is not what you stated in the video. Please clarify
what about a rollover into an IRA?
Certainly
With the annuity, you mentioned that the retiree gives a certain amount of their TSP to an insurance agency (currently MetLife). What happens if the retiree passes on before the money is used up? Does the remainder goes to a beneficiary, or remains with the insurance agency (MetLife)?
Usually, the insurance contract keeps whatever is left. Great question.
@@PlanYourFederalBenefits whaaat? That sucks!! Thanks for the response 😊
I started working young for the fed gov't when I was 19 years old. I plan to leave the government @55 & start installment withdrawal from TSP. After 2 years when I will reach my MRA(57) +30, I want to start receiving FERS pension AND FERS supplement. Will I still qualify for the supplement? Thanks for your time and knowledge.
Great question. It would depend on what year you were born. But, you would most likely get what they call, a "Deferred Retirement". The retirement benefits with a deferred retirement are not great. Here is more information on that: hawsfederaladvisors.com/the-easiest-ways-federal-employees-can-retire-early/
@@PlanYourFederalBenefits thanks!
Can I withdraw from the TSP if I’m still a federal employee when I turn 59.5?
I think so. You will pay high tax bc you have your normal salary income, but no penalty. If you have a Roth, better to take from that. No tax is taken from a Roth withdrawal once you turn 59.5. That is what I did in a one-time WD. I have not looked into whether you can take out from your TSP Roth with no penalty. I have never fully understood the TSP/Roth divide. @PlanYourFederalBenefits, perhaps a video on that would be helpful. @itguru2037, I would wait if possible to take money out of TSP until you are are on your FERS pension, when your income will be much lower and you will be in a lower tax bracket, likely.
Yes! You won't have the 10% penalty if you withdraw at age 59.5 (even if you're still working).
@@jkelly02 that’s great advice
Is an annunity the same as an IRA rollover?
No.
No. Think of an English lord giving a lump sum to a bank to allow for the bank to provide an annual income to some relative. That is what the TSP annuity is sort of like. The relative has no choice in the matter, once the money has been handed to the bank. They can't access that lump sum at all. They can simply take that little SIP that is given to them every month. Period.
An IRA rollover is a different thing altogether. It is simply managing your retirement accounts, rolling from one to another in a way that avoids a withdrawal penalty. Normally, if you take a withdrawal when you are younger, you pay a penalty as shown in the vid. But if you take that check and put it in another account within a certain time, you avoid the penalty. This was most helpful to me when I was younger and I had several trad IRA accounts from different employers. I was able to cash them out and put them into one IRA. I think I put them in my TSP, but it's been a long time and I forget. I think you can put them in your Roth and simply pay income tax on the withdrawal, and then that money will grow tax free for the rest of your life, and can even be inherited by your descendants without them paying tax on it ever. Roth accounts are amazing, which is why they are restricted as to your contributions (currently around $7K/yr; the number goes up periodically when the law is changed; used to be about $4500 per year). But I am not sure a rollover is restricted.
What happens if I take a TSP Loan a few months before I retire, in order to carry me until I start actually getting my pension?? How does that affect my TSP, taxes, etc...??
Great question. You're answer is in the video. But, here are the rules written out for each circumstance:
Traditional FERS and NOT retired:
Age 59.5 is the minimum age to avoid 10% penalty when withdrawing money from the TSP.
Traditional FERS and RETIRED:
Age 55 is the minimum age to avoid 10% penalty when withdrawing money from the TSP.
Special Provisions Employee and NOT retired:
Age 50 is the minimum age to avoid 10% penalty when withdrawing money from the TSP.
Special Provisions Employee and RETIRED:
If you were eligible for a complete retirement and currently retired, you can withdraw from the TSP at any age.
Keep in mind it may put you in a higher tax bracket so I would not take out more than you need to get by
@ *clay* after retirement you can continue to repay TSP loan in monthly installments (no tax implication) or if you stop repayment the outstanding balance is considered withdrawal and taxed as ordinary income.
So, that is what I will be doing at 59 1/2
Annuity is terrible
Agree. Just look at how Feds got screwed on the long term health care program. What a disaster. I can see the annuity manager f'ing up and nuking the annuities they are handling. No thanks.
Is not 72(T) another way to access TSP before age 59.5 without penalty?
Thank you for mentioning that. If you want to see a video on that in the future, feel free to ask this question through this link:
app.hawsfederaladvisors.com/question-submission
Retired 20 years early on disability but I'm in deep debt (2 yrs no income waiting on disability+medical bills).😬 Looking for free advice from comment section... Should I use my tsp to pay off debt that will otherwise never get paid off?🤔🤷🏾♀️ My credit score has been in free fall!😢
Great question. Sorry to hear that. Whatever leaves you better off is probably the better idea. Feel free to schedule a meeting with us to talk about all the options that you can consider: app.hawsfederaladvisors.com/work-with-us
With installments do I still pay 20%
I'm not sure if I understand your question completely. If you're referring to taxes, then yes, you would still pay taxes on TSP installments if your TSP is a traditional TSP. Hopefully that helps.
So each month is 20% taxes payments?
Dallen: Can you reply back with the rules for Roth withdrawals even if you retire after 30 years and MRA . The money in Roth must have started 5 years before you take any of it out or reach 59-1/2 ??? And isn't there something about if you take a withdrawal before 59-1/2, it can only be the interest portion ??? else if you touch the principle portion that is penalized ?? Is this principle and interest only topic on Roth applicable before 59-1/2 and also before having 5 years of the money in Roth ?? If there are penalties on this Roth take-outs because of length of time money is in or the age of 59-1/2 , how come you didn't mention it here in this video. Seems like it should be something your audience of viewers should know about .
Not the interest portion. Pretty sure you can take out your Roth contribution without penalty before you reach 59.5. Can't recall how long until you are vested or whatever, but I think you have the right instinct. If it is only a couple years, you better not take anything out of a Roth without checking carefully. If it's Fidelity, they can tell you the rules.
Thank you for bringing that up. Yes, with a ROTH TSP account, you have to have been contributing to it for at least 5 years as well to avoid the 10% penalty.
Unfortunately, since TSP does not allow Roth Conversions, I am slowly rolling over my money to another institution.
As I said to another comment, it would be nice to see a video on the TSP-Roth divide. Maybe there is already one. Need to look. It is a divide that confuses me. I feel like it is different than having a Fidelity Roth and the TSP. The TSP made a Roth program but it isn't clear to me how it works.
@@jkelly02 I've had a Roth IRA account with Vanguard for several years and also contributed to Roth TSP for the same time period. The biggest difference is that with the Roth IRA, you can only contribute $7k, or $8k over 50, and with the Roth TSP, you can contribute $24k, or $30,500 over 50. I'm doing Roth conversions because I don't want to get stuck with RMDs at 72, driving up my taxes and IRMAA.
If you know how much you plan to convert in total you could move all that to a contributory IRA at the institution where you have the Roth, convert from C. IRA to the Roth IRA over time and have many more investment options available you, no tax consequences on the rollover, same taxes as before on the Roth conversions.
@@stevebc957 That is exactly what I'm doing.
I moved a portion of my TSP into a Traditional IRA. Then, I over paid my taxes to help pay for these taxes the following year. The plan was to convert the following two years near year end. Made equal estimated tax payments to avoid penalty confusion as Conversions performed in 4th quarter. Now, I will maximize the Roth conversion instead within the tax bracket as I heard a rumor Roth Conversions may not be allowed in 2025. If false, I can then convert the balance next year.
Other things that a person should kind in mind .. RMD's will occur in your 70's .. so people with money in their TSP regular account (non Roth IRA) will have to take out appx 4% per year and pay taxes on this amt. .. so prepare for this and start withdrawing in your 60's etc. Also I was told if you have many different accts in your TSP and ask for a withdraw .. they will take it out of each fund (ie C , G , I fund etc). at an equal amt.
How do most of you guys still making profit? Even with the downturn of economy and ever increasing life standards
Well, I picked the challenge to put my finances in order. Then I invested in cryptocurrency and stocks, through the assistance of my discretionary fund manager
Yeah that's right I think it's right to invest with professional at least it saves the trauma of too much loses
The first step to successful investment is figuring your goals and risk tolerance either on your own or with the help of a financial professional but it's very advisable you make use of professional
I don't really blame people who panic. Lack of information can be a big hurdle. I've been making more than $21k passively by just investing through an advisor, and I don't have to do much work. Inflation or no inflation, my finances remain secure. So I really don't blame people who panic.
Thanks a lot for the recommendation.
Is it true you have to wait thirty days after retirement to draw from your TSP?
Sort of. Here is a great resource on that question:
www.tsp.gov/withdrawals-in-retirement/
Retired 3/31. Received "Payment Rights Notice..." TSP dated 4/18. I thought this is proof, I could start the withdrawal process. However, 7/20 transfered via FBO to financial institution with no problem. Gave reasonable time for TSP to take necessary action. Set up in TSP with account# provided by financial institution. Only issue - did not appreciate check sent with no tracking from TSP.