TSP in Retirement
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- เผยแพร่เมื่อ 23 ก.ค. 2024
- What should a federal employee do with Thrift Savings Plan (TSP) in retirement? This video discusses 3 options for a newly retired FERS employee as well as pros and cons of each.
Deciding what to do with your TSP is one of the more important ones in your federal retirement.
The new TSP web site is simply awful and very difficult to use. It doesn't even show where tax forms will be posted. It doesn't even open with a screen showing asset allocation and YTD performance.
Totally agree. I can never remember how I found something. Shouldn't have to take notes to use a website🤨
Yeah. WHEN it works.
best explaination of the annuity in basic terms i have ever heard.
Great video. Very straight forward answers to questions that I had for TSP vs IRA.
I think transferring to a Fidelity or Vanguard IRA would be beneficial...greater flexibility on what funds I want to sell to take distributions, the shorter timeframe to get your money, getting away from the burdensome TSP paperwork, and reducing the delays to receive money when you need it.
All fair points Glenn!
@@glenng9111WoodbridgeSwing I will say, depending on your investing ability, may still be wise to at least work with an adviser in an advisory fiduciary capacity regarding investment advice. When your money gets there, it will land in something akin to the G fund probably making a bit less. Might not be the best move to put it all in a stock fund with the market at record highs IMHO opinion but what do I know. Talk to someone smarter than me.
@@boatlover1875 Great advice. Thanx!
Very helpful, thanks for sharing.
A hard NO to annuities!!
The interest rate they use is so low and they assume you’re going to live to be like 90! If you wanted an annuity there are so many better choices out there
Understood on annuity. Hardly anyone takes it. However, there is an option to do partial so you have a guaranteed income monthly and keep the rest in TSP or IRA. Then you still have guaranteed $1,000-2,000 or more per month thru the bears like we are having now. Also now higher interest rates mean better annuity potentials right?
You can always do a partial, and yes, the payout is based on current interest rates
My wife and I will be retiring by the end of the 2022. We are looking to downsize our home and wanting to purchase a new home. I will be receiving a post office annuity and social security supplemental(obviously until 62). I also have about $500k in my TSP. I wanted to just take a scheduled set amount out of my TSP every month. While applying for a mortgage. Can the scheduled monthly TSP payments be recognized as a defined benefit and used in calculating my monthly income? I don't see myself purchasing a Met life annuity. Thanks in advance for any help or suggestions you may have on this issue. Keep up the great work educating us federal employees..
They don’t recognize it as a defined benefit but they would consider the TSP as an asset I believe. No need to purchase the annuity for mortgage purposes.
It would be ideal to get a new mortgage while u are still working if possible.
I had both a TSP account and a CSRS Voluntary Contributions account. The VC account was converted to a fixed annuity at 7.6% when I retired. I'm just going to let the TSP grow for another decade or so before starting to draw it down.
Yes, the VCP was a sweet benefit for CSRS employees.
@@FederalRetirementPlanning The only negative is there's no COLA, but like you said, the monthly payments are reduced when you add on things like inflation protection. There's nothing magical going on there, they are just withholding your money up front and giving it to you later.
So itt is my understanding that IRA and TSP are considered different. So, could I rollover my Roth part of TSP $ to Roth IRA and call it RMD?
They are different but similar at the same time. If you transfer your Roth TSP to a Roth IRA then you will not have RMDs. If your $$ stay in TSP then your RMD cannot be transferred to a Roth IRA.
The TSP annuity seems like a good option to subsidize the FERS survivor benefit at 50%.
For instance let’s say you and spouse combined your FERS is $2k a month. One of you dies then the FERS survivor benefit becomes $1000 a month.
If have $250k in TSP and convert that into a joint survivor annuity you’ll get about $1000 a month.
So when 1 spouse dies survivor will have $1k FERS and $1k annuity = $2k a month.
What lots don’t realize SS is the same thing. I have seen couples living good getting 2 SS checks and/or spouse getting 1/2 of other spouse and when one of them die only left with 1 SS.
The survivor will step up to the higher SS amount, but yes, it will only be one.
You could use the TSP annuity but I'm not a fan of doing that since feds have SS that is guaranteed and either the FERS annuity or FERS survivor annuity.
I can never imagine a scenario where the TSP annuity ever makes sense.
@@swright5690 what do you mean? It’s not a bad single life pension.
Let FED retires know that it will be 6-18 months to get thru the interm process. I retired on 8-27-20 from ICE and still waiting to get out of interm pay status. Also if there is a divorce involved you will get less than what they tell you. I have a divorce and im getting 1/4 of what they told me. This is a real drama for new retires. Getting in touch with opm and getting answers is very difficult if any luck at all. It would be a great idea to push the people to get cash savings built up and to maximize their AL for buyout. I f they are able to max out the 401k with catch ups no matter of what month they retire it will help in the tax situation.
Just wanted to pass this info along for your subscribers.
good video!
I haven’t heard anything near the 16 months yet but yes, I have heard multiple retirees say it’s taken over 6 months. I agree that maxing annual leave and a cash reserve will help bridge the gap 😉
That’s insane
This is very informative and helpful!! I'm 34 years old and I'm investing13% into Roth TSP and plan on working till I'm 60-62yrs!! I already have been investing past 7 years!!
Sounds like you’re off to a good start!
@@FederalRetirementPlanning thanks!! I'm planning on adding more to my contributions by 1% a year!
Thanks for info I’m trying to retire from USPS they make it so complicated anyone in Albuquerque NM u can refer?
Sorry but few only advisors that work with feds are few and far between! That’s why I transitioned to working virtually about 5 years ago
Great video. Question: I know with the TSP in order to make a withdrawal I must get my spouses notarized signature. Is this true for an IRA?
Thank u! No, that is not the case with an IRA
@@FederalRetirementPlanning great news. I plan on retiring next year and keeping 3-5 years expenses in the G Fund and transferring the rest to a Vanguard IRA. Thanks for the work you do.
@@frankofva8803 you’re welcome and congrats on the upcoming retirement!
Hello. Thank you for all of the information. My question is regarding separating from the government (as a civilian employee) or taking an early retirement. If a person has a tsp loan and separates or retires early how is that handled? Can the loan be paid back from the remaining balance in the tsp or does a person continue to make loan payments on their own? Are there options?
You can’t pay it back to TSP, but it is possible to pay it back to an IRA and the timeline is based on when TSP processes their paperwork.
I’d have to research exact details.
If u leave it in TSP and don’t do anything it will become taxable within about 90 days
@@FederalRetirementPlanning I thought you said in a different video that if you separate you could just leave your TSP alone? I thought maybe you could leave the TSP alone and continue to pay back the loan. I just want to make sure I am understanding this correctly. You can not continue to make payments to repay the loan in the tsp? And one more question…if you are not able to pay the loan in full before separation will that make the loan be foreclosed on?
(Thank you in advance. I just want to have this information to take back to my account. She told me that I could leave the TSP open and continue to make the loan payments through my personal bank account.)
@@lanibellboutique2574 you can leave your TSP but contributions aren’t allowed once you’re separated, therefore no loan payback. Once you separate and TSP receives notice of it they will report the balance of the loan as a taxable distribution
@@FederalRetirementPlanning OH WOW. Ok. This is the opposite of what my account told me. Oh gosh. So at that point the loan is considered taxable income. I would pay income taxes on it and be done with it? And would I pay a penalty.
i believe that if you transfer money out into another account you forfeit the 10% penalty grace. ?
No penalties on a transfer
Firefighter with a ROTH TSP. He rolls into a ROTH IRA at 50 ( when he retires at 50) without any penalties?
Can he then, take money out (to live on) monthly tax free ?
I can’t find anything online that clearly explains Special Category Stats.
u can do a transfer w/o penalty and then take out principle tax free but you have to wait till 59.5 to take the earnings out income tax free
@@FederalRetirementPlanning Hopefully putting enough! Thank you very much for the reply!
Failed to discuss the other withdrawal options associated with leaving funds in the TSP.......lump sums and scheduled payments outside of annuities.
Leaving money in TSP is partially discussed around the 5 minute mark. You can change your distributions once every 30 days and lumps sums can be done once very 30 days.
Vanguard has variable fees based on your holdings. If you maintain a balance of 5OK or more of a particular fund, they are "Admiral Shares" which have reduced fees. Below 50K they are "Investor Shares".
"Below 50K they are "Investor Shares"." That's not correct.
After 38 years when will the TSP be correct?
I am about to retire at 62 from federal service. I have my TSP in 4 life stage funds. Would leave the in life stage fund or move to of the other funds?
Y do u have 4 different ones?
I would recommend u either look for a flat fee advisor to help u with your retirement or pay an advisor a fee to help answer some questions and point u on the right direction. If u would like my help u can book a call on my website
There is no reason to have 4 lifecycle funds
I bought into them as they open and simply kept them. Their share values continue to increase so I kept funds in them.
So if I’m not contributing anymore, what happens to that money left in TSP. Am I still invested in those funds & depends on the market where I can still lose or gain? I’m 58 & plan on retiring end of year, I will be taking a monthly payment from TSP.
It doesn't change just because you retire. That would be the 2nd option discussed in the video
@@FederalRetirementPlanning Actually it does as you cannot move your money to a brokerage like Vanguard or Fidelity before you retire. Not to say one is better regarding your situation. First, it takes longer to take a distribution from the TSP. Second, you have fewer investment options. Third, it takes longer to make a transaction. Fourth, you cannot buy individual equities. How much do you charge for your "Federal Retirement Planning?" Scary stuff. Weird, most of your ilk were selling variable annuities at your pre retirement presentations, I'll at least give you that.
@@boatlover1875 Correct, you can move money out once retired but as far as your assets in TSP there are no differences in investments, trading, beneficiaries, etc. Only that you now have the opportunity to money out or/and take distributions.
No VAs or products sold by me, fee only.
@@FederalRetirementPlanning Not sure I understood your reply, sorry. There are many differences after retirement. You can buy stocks. Buy many more funds. Make real time trades. You can access you funds in a much more timely manner. You don't need your spouse's notarized permission to do anything even if she wasn't married to you at any time you contributed to the fund. I'm sure I missed something, LOL.
@@boatlover1875 No, not within TSP. The question is about the differences in TSP, not what can be done outside of TSP in an IRA.
I'm under FERS...I am struggling with the decision to retire. Did I understand (not from you) that if you receive a monthly annuity there is a 20% tax deduction?...I am 57 yo 30 yosvcs. Second question: If you do receive a monthly annuity does the remaining balances of each fund continue to grow? Last question: If I borrowed on my TSP and it's paid back before retirement, does the amount I borrowed be reinvested back into the account? I have a headache...this is so overwhelming🤪
It depends, if you take a large enough of a distribution they will do mandatory withholding of 20%, but if it's a smaller installment payment you can sign a form and elect to change your withholding.
Taking distributions has nothing to do with the performance of each of your funds. They may continue to grow of your funds do well.
Yes, I believe your loan repayments will be paid back to the funds you are in proportionately.
Thank you for responding….how do I find out what that “smaller installment “ is
@@SeamsterStudio2009 if it’s an amount that can be taken out over a period longer than 10 years. For example, a 4, 5, or 6% distribution
@@bradbobb3835 thank you for this information. It helped calm my anxieties some.
@@SeamsterStudio2009 It all boils down to budgeting. What can I afford to live on. Nobody knows how long they will live after retirement, sure. But the safe bet is always the way to go when you reach retirement age. The TSP is a self-aggradizing system. The more it has in the well from everyone at any time, the more money it is making for someone somewhere. You have to look out for yourself. What percent in payments at or above ten years worth, factored into your personal life expectancy, plus other forms of income such as work pension and Social Security figure into that budget. Plus, what will my TSP yield as I'm taking from it....which will be negligible as it shrinks because you are not adding to it, nor were you supposed to. Watching the market and your personal TSP yields are a good idea as they grow. Having that nest egg available and drawing upon it are what is important when you do retire. The 10 to 15-year plan is a good target. With SS pending, and if you also have a pension, then it's a cushion that allows you a little elbow room when choosing TSP payment options. Taxes are going to be your biggest concern. I have a mandatory 20 percent taken out, so I budgeted as such. Thanks in part to the TSP collapse of the past two years, my taxes came out largely in my favor as I had little to no interest build-up. But it won't be that way every tax season. The only thing is that as your TSP diminishes your interest and thus your tax burden will as well. Congress is debating over the Windfall provision, and it doesn't apply to all federal workers, so you want to look into that. My adage: it's better to have a little too much early and risk shorting yourself in the long run, than it is to living with less and leaving it on the table at the end. "I wish I had" is better than "I'm sorry I did." Factors like children change it a lot. But for the single retiree, I think it's the way to go.
Can a TSP beneficiary transfer their account to an IRA?
Yes sir, there are a number of rules that are covered in another recent video
OK---rule 1, 2, 3, Can't i just have a Monthly withdrawal of about $2,300 a month from the TSP with out giving up all my rights. No videos at all on a Monthly withdrawals and how too,
no videos on how to do that because it must be done withing the TSP system, but yes, you can definitely set yourself up on a monthly withdrawal.
Please answer on option #2, what happens if you pass away? No one addresses that.
It would go to your beneficiary
Exactly right
Whether you are in good health or not at retirement I suggest you do a Roth conversion. Move if you can to a tax friendly state and then in one or two or even three years convert it over. You will pay federal tax on the transfer. Around 30%. But remember that the Ira funds are not all yours. The Roth is. On the Anuity side of the discussion be aware that there are insurance companies that will charge you about 10% like $90,000 on $900,000 and you can get a survivor benefit with it. But they are rip offs. A better option if you are not an experienced investor is to get into several Vanguard funds. But do it in a rising market. Right now there is a lot of downward pressure due to rising interest rates, inflation, and a pending Ukrainian war.
A conversion can be good but certainly isn’t for everybody. It’s also hard to say that the taxes paid will be 30%. That will vary based on how much a person converts, starting at 12% and could easily go north of 32%
Pending war……Here we are a year and a half later of that war and markets have not recovered to Jan 2022 levels and interest rates are at rates we have not seen for 20 years.
Great information but your audio is killing me.
Along with all the "OKs ?".
Good info. Here's the big elephant in the room you did not did not discuss. First, particularly during the pandemic, the market was kind of predictable. With TSP, if you want to move between, say. G and C, you have to make a decision before noon as to what the price would be at market close, four, If you were retired, you can move your money to Vanguard/Fidelity etc... and make near real time decisions in a wild market. You can also pick a stock here and there. Both of those brokerage firms have similar costs and don't charge for stock trades.
I don't see the trading deadline as being a big deal because I don't advocate for frequent trading. I'd also have ot disagree with the statement that the market was predictable during COVID, I personally didn't hear one professional say we were going to have a V shaped recovery.
However, I would fully agree that Vanguard or almost any other custodian is far more flexible. And if trading is your thing, then yes, the trading deadline is very limiting within TSP.
@@FederalRetirementPlanning Agree and disagree. For an employee, fire and forget. There was a unique opportunity for about six month with a very predictable and wild market that could trade 2, 3, 4% one way or another in four hours. For weeks or months a big loss was followed by a big gain but you had to be able to make a market trade to take advantage. I'm retired and had about $1m in my TSP, got out just before the poop hit the fan as I didn't like the writing on the wall. Too many times I saw an up market int eh morning only to see it tank in the afternoon. Easily left 200-300k out there. Heck maybe more. Easily made 40% in a Roth I'd funded in 3 years retired for 3 years in retirement during this period. Plus, you can't buy a stock here and there when the opportunity arises, trades are free in the big platforms. Back int the day, TSP was so cheap, these days, a Vanguard or Fidelity ETF fee ain't much different and much more flexible. For a new employee, go stock, keep investing, and don't time the market. When it goes down you are buying in cheap, will make a bunch on those investments when it rebounds and get the rest back along the way.
@@boatlover1875 True, the ETFs can be matched at just about any custodian now for the same or lower cost.
Also, an employee is tied to the TSP as far as I know until separated. It is a great program.
@@boatlover1875 separated or age 59.5
I heard once you are dead, you can no longer make TSP withdrawals.
Hmmm, probly have to check on that one….
I am about to retire in a few months after 25 years of max contributions in the TSP C fund which has performed outstandingly. My wife and I are both high wage earners and will both get pensions which net will be twice our anticipated retirement budget (zero debt, zero mortgage). We also have a large cash safety net, her large 401k, and a large taxable investment account (100% S&P index fund). Since we are very risk tolerant, I am thinking of keeping my TSP as is, 100% C fund, and maybe draw at 2% per year (half the 4% rule). If the market crashes, we can wait it out 5 to 10 years without withdrawing, no problem. With 10% compounded return, we would likely end up with a huge TSP in old age for heirs or charities of our choice. I am aware of the age 72 RMD's. I really don't like bond funds since they are based on debts that will never be repaid and don't even keep up with inflation. Is this a good plan?
🤷🏻♂️ it sounds like you’re in the fortunate position to have a lot of choices and still be ok.
One thing I wouldn’t do is leave money in the TSP in the C fund vs moving it to another custodian and investing in an S&P 500 fund. The outside custodian will likely be much more flexible when u want to take withdrawals
What about Lump Sum withdrawal ?
What’s your question about lump sums? Take all of your money out at once?
@@FederalRetirementPlanning yes sir. I am moving to the Philippines and I was thinking I would use my TSP to build a house and to buy a car. My social security and my pension should be easily enough to live a very comfortable life there. I have about 10 months to retirement, I'm currently in Kuwait working 12 hours a day 6 days a week. Just trying to get some money in my TSP account
@@DanielReed-hu3ny taking it all out at once isn’t normally a good idea because of the amount of taxes u will pay
@@FederalRetirementPlanning okay I understand..... maybe take it out in smaller amounts per year.
By this point in time this video has been posted for a year someone else may have already added this comment; You mentioned tax planning in this video so it is worth mentioning that you cannot do Roth conversions in the TSP so if your tax plan includes doing some Roth conversion before RMDs and/or SS kick in you might find it beneficial to move to an IRA where you could do Roth conversions.
Agreed
Simple. If you're retiring soon, and you're planning for your TSP build-up over the years to become a source...or, as it will become, the MAJOR source...of your income after retirement, then immediately move ALL of it over to the safer G Fund. ALL of it. This is a volatile economy, with no sign of stabilizing. Don't make the trustful mistake I made. Don't trust your TSP account to yield despite enormous economic swings. That's fine if you had 10 percent or more allocated as I did and you've just started the job. But once it has built up over the years, it makes no practical sense to view the fund as a money-maker anymore once you've reached retirement age. It's meant to be that way. You are going to, in major part, live off of that build-up. It turns from an investment INTO a source of income. What you DO NOT have when you start up as a young person is the hope of the help of Social Security on the horizon. But when you get there, your perspective will change. As well as your health. And the state of the economy. Taking chances is for the young. You invest in these retirement programs because you want the money when you retire. It's that simple. Investment counselors will disagree because they like that 60-year-old man with that big, big money bag. But it's YOUR money bag. And you would like to be able to draw from it as the twilight years move on.