The RIGHT Way to Use the TSP
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- เผยแพร่เมื่อ 26 ก.ค. 2024
- Using your Thrift Savings Plan (TSP) account successfully involves a lot more than just picking investments. Federal retirees need to understand portfolio management principles to give them the best chance of success. In this video, Thiago Glieger, federal employee advisor, discusses how to use your TSP correctly.
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Outstanding content! Happy 4th of July!!
Thank you, and likewise! -TG
You don’t need to leave your $$ in TSP post retirement. Roll out of TSP, into a qualified plan . Leave a little in TSP to keep the account open because the G fund is a great investment that is still available when the market volatility happens. I heard this on another YT channel and seemed like great advice.
Yes, lots of feds do this. Individual retirement accounts can have more flexibility; just make sure to do an analysis of pros/cons of one option versus the other. Thanks for tuning in!
You may keep your TSP as long as your balance is $200+ otherwise TSP cuts you a check for that sub-$200 balance and closes your TSP account. If you plan to keep low balance leave at least $200 in G Fund as it doesn't go negative.
Very helpful with examples
Glad you enjoyed!
My quick "back of the napkin" approach was similar but worked primarily from gross pay then subtracted the expenses I won't have in retirement. So, starting grom gross pay I subtracted the 6.2% for social security, the 15% going to the TSP, and the 4.4% FERS contribution. Likewise I subtract the money I'm currently putting into my HSA. My goal is also to have my house paid off. So I subtracted the principal and interest portion of my mortgage. I figure that gives me a conservative number to work with right now. As I get closer to retirement I can get more detailed.
Agreed on being a bit more conservative when planning. We tend to philosophically plan with our clients the same way; we round UP spending, round DOWN savings/growth. That way, if either proves to be wrong, the retiree is in a better place economically! Invest aggressively, plan conservatively...not advice, but something to think about. Said another way, plan for a worser scenario and you'll mostly always be in greener pastures. This is the art of risk management.
Crazy how much FERS contribution is now that... .8% for me.
New subscriber, great content explained in a clear manner. The background music is very distracting, no value added. Thank you for the video.
Welcome and glad it was helpful! Thanks for the feedback, we've dialed down the music in more recent videos. If you happen upon any new ones that are still too loud, please let us know!
Sir thanks for the video , could you post a video describing compound interest within the TSP.... TY
Sure, we'll add this to Thiago's list of topics, thanks for suggesting it!
I enjoy your videos very much. One of the things that Dennis Damp has recently pointed out is the issue with the TSP in regards to inheritance. So lets say I have my TSP and my spouse does not have a TSP. I designate her as 100% (spousal) beneficiary. I pass before she does. She can take over the TSP and keep it (beneficiary participant account). She also can designate beneficiaries. Now she passes and lets say our kids were beneficiaries of her spousal beneficiary account. The quirk is they cannot transfer the money to an Inherited IRA (beneficiary IRA). They have to take it all at one time, all taxable in that year.
What are your thoughts about that kind of scenario? Or maybe your thoughts on pros and cons of keeping money in the TSP vs rolling it over to an IRA after retirement? Generally my thought has been the TSP is fairly simple with much lower fees. But is that really true? Maybe you have a video already on that subject and I've not come across it yet.
Really great point. Children having to take a distribution for the full account all in the same year would be tragic. Depending on how big that is, as well as their income levels, that could push them into the highest tax bracket, possibly losing close to half of the inheritance towards taxes.
The TSP historically had the lowest expenses, These days, close if not the same can be had in IRAs. Further, there is cost versus value--while investment fees are lower, the COST would be tremendous to inheriting beneficiaries, as the taxes should be viewed as a cost towards the assets left behind. In this circumstance, 'saving pennies' on investment expenses but being 'pound foolish' regarding taxes wouldn't be the best way to plan. Hope this helps! -TG
Yes, the spouse beneficiary should roll the TSP into an IRA to avoid the issue you described.
Don't forget to calculate anticipated cuts to SS benefits. Whatever your projected payout is you should factor in the 21-25% cut in SS in the 2030s.
You can factor this in, but this has not been corroborated. They are more likely to increase the Social Security tax (and age) for active workers than to reduce retiree benefits this has been done several times before.
The TSP does have the low costs due to the index approach, but the TSP's web site is awful and its customer service reps are not sufficiently trained to be helpful.
Remember that most work-retirement accounts are intentionally designed to be self-service. Some people love it, others hate it. TSP's core funds are very cheap, but its mutual fund window options can be expensive.
Totally agree. In my opinion the TSP is clueless when it comes to how people use pretax and Roth and combines them. Also they hide and won’t disclose any dividends you receive. It’s a whole cloak and dagger set up.
Can you explain what a mutual fund window option is? Is that the Lifecycle funds?
Yes the site is messed up and is useless, if they were a private company they would have been out of business. They hide everything and doesn’t show you capitol gains or nothing.
@@CumminsTurbo4 The Lifecycle funds are the "Retirement Target Date" funds. They are an algorithmically designed combination of the C, S, I, F, and G funds, depending on which date you choose. The Mutual Fund Window (MFW) is a separate platform within the TSP that allows you a larger choice of investment options in varying mutual funds.
I worked for the GOV'T for 10 years and 6. months. I resigned from my federal job 8 months ago and left $196K in my TSP. I am 62 and have been withdrawing from my Roth fund periodically whenever I need more money for living expenses. My question, I could retire but just haven't put in any of the paperwork (to lazy and its confusing) in the interim I have decided to go back to work for the Government, will I automatically be able to just restart my TSP deductions again?
Thanks for your question. If by TSP deductions you mean contributions, then yes, if you are once again working as a covered civil service employee then it sounds like you should be eligible for TSP contributions directly from payroll deductions again. Send your HR an email to confirm how to set this up.
What about just taking the money out of your TSP and throwing it over into a brokerage account into dividend stocks?
You can always invest outside the TSP, many do. I encourage active employees to also save outside the TSP (after maxing TSP) if they can. Many retirees also choose to move to other platforms, the same is true in private sector 401Ks.
Im a new (3 years) employee with TSP, where is the best place to divide mi 100%
Congrats on your new role as a fed. It's hard to say without knowing your circumstance, so I encourage you to check out the many resources on our website that talk about portfolio management concepts. That should be a good starting point for you.
If you’re at the beginning of a long career (10+), then heavy on the stock side will give the best return over the long haul.
If I make a TSP withdrawal once a month, can’t I just rebalance the account to put money back into rage C,S,&I funds. Sure it is a minor inconvenience, but this and other videos make it seem like there is no way around the equal withdrawal from each fund.
Correct, and this is merely one factor in deciding the custodial choice for your retirement assets. Retirement requires more complexity which drives most people to move away from work-based retirement accounts. 401k/TSP/403b/etc are intentionally designed with slimmed down feature to prevent analysis paralysis.
Another option transfer part of TSP to IRA with Vanguard or Fidelity which have C S I F equivalents and withdraw as needed.
At what age can we start to draw from our TSP?
This depends on your job status. Special Provisions allows federal retirees to w/d from the TSP penalty-free as early as 50. Alternatively, retirees can do so at 55, active at 59.5.
$3,500 fers means you worked for the USG for 30 plus year, and if you are receiving $2,500 is SS you waited until 65-66 depending on age. I'm guessing most of your viewers are not needing $9,000 a month just to survive.
Most of our clients do, actually. There are many different ways to live that vary depending on where you live.
Clearly you do not live on the East coast! My property tax alone is over $7000/year.
These numbers seem extreme. For me to take home the same as I take home now I only have to take $10,000 a year from the TSP.
Depends on where you live and lifestyle. Glad to hear you’ve got flexibility in your plan! -TG
Where in the USA can you live off 833.00 a month?
@@nakho3550 , I don't know. Where?
@@nakho3550 You need to include your FERS pension. If you receive $2k/month from the pension, that give you $2,833/month to live on. If you are in an average/low cost of living area, that is doable. ($34k/yr - taxes)
@@nakho3550a small town in south dakota
Can I buy $SQQQ ETF on my TSP?
No, "short" investments are not permitted inside retirement accounts, including IRAs.
Is it listed as available on the Mutual Fund Window?
I thought the roth was pretaxed? I swear i hear something different everytime 😂
It's commonly mistaken, and has to do with a misuse of the word "pre-tax". The Roth is "pre-taxed" before going into the TSP, so once it's inside the TSP it is tax-free. Traditional does not get taxed before going into the TSP. That means dollars inside Trad TSP are "pretax", meaning BEFORE taxes have been taken out. Here's how to remember:
TRAD = pre-tax $$ goes in, and taxes apply when $$ comes out
ROTH = after-tax $$ goes in, so no more taxes after.
Hope this helps.
@@TheFedCorner If I pull out all of the money in the roth before I hit the minimum retirement age do I get a 10% penalty?
@@A_Minus007 Generally, yes. However retired feds can access the TSP as early as 55, or 50 if under special provisions.