53 Years old Discontinued Service Retiree who needs help........

[DigginGator]

Hello. I am to retire at 30 years with a DSR from my agency which I have accepted. Because I still have to wait until I am 56 for my FERS Supplement to kick in to my annuity I am looking at using my TSP to augment the monies I will need for a few years. Seems like 53 years of age is not a good time to pulling money out, but I really need to.

My question(s) are what do you all think would be the best mechanism? I know I am going to get hit with the 10% early distribution fee and don't seem to see a way out of that. I am anticipating taking a monthly payment and then ratcheting it down in a few years when the supplement kicks in.

I am hoping to get some god advice from you folks on this forum as I see everyone seems to really know their TSP stuff. Any and all help is appreciated......Thx!

 

[Jackbnimble]

I would get a part time job (maybe full time) to help reduce the amount that you feel you need to pull out of your TSP. Average life expectancy of a person in the US is now at 78 years. You have more than 30 years of living to fund with your TSP.
Work until you can draw FERS supplement and then go part-time if you can't live off of FERS and supplement alone. I would do anything I can to not dip into my TSP until as late as you can. But that's just my 2 cents.

 

[James48843]

Start by reading the book:

https://www.tsp.gov/PDF/formspubs/tspbk02.pdf

 

[DigginGator]

Thank you for the quick response. I do intend to do part time work and some consulting. I have about 600K in my TSP right now and my annuity won't be to shabby. Agree on the life expectancy thing as well. To that end, I want to enjoy retirement and not have to work to much. Have already faced a lot of stress and anxiety in the work place and want to leave it behind. I seem to be reading a lot of threads of people who are uber motivated to have huge nest-eggs, which is great, as long as you can enjoy it.

My question was more geared towards the ability to setup monthly payments out of the TSP for now, then back it down after a few years, while still keeping the funds in place. What are the hits I will take (i.e. taxes and penalties)? To me quality of life is more important than a huge savings account........

 

[Scout333]

Diggin, might want to look at 72t withdrawal option(s). Check in to this thread. Good luck! Share your final choices with us TSP'rs.
Retired FERS-VERA/VSIP Considering 72(t) TSP Withdrawal Options

 

[evilanne]

Take a look at the TSP Retirement Income calculator. I put in some numbers based on your post and conservative RoR of 6% for single taxpayer: https://www.tsp.gov/PlanningTools/C...eOfReturn=6.00&haveDependent=No&dependentAge= The life expectancy column shows the monthly amount you could withdraw based on the RoR, you can modify based on your actual situation. If you select life expectancy and retire prior to age 55, you must continue with life expectancy for 5 years or age 59.5 (which ever is later) to avoid the 10% early withdrawal penalty. At 59.5 you can designated monthly amount annually and reduce to $25/month. In other words, you cannot stop payments once the supplement kicks in at MRA.

I retired under VERA last year and I'm still trying to figure out my TSP withdrawal strategy. Other info that may or may not be useful:
--One way to reduce payment amount (if you don't need calculated amount) is to do a partial withdrawal before you begin life expectancy payments--can't do this after the fact under the current rules. If they change rules, it may be possible to do another partial withdrawal to reduce balance once you reach MRA (would not count on this). If desired, you should be able to transfer your IRA back into TSP after life expectancy payments end.
--Same rules apply to IRAs so if you do a partial roll over you can do the 72(t) withdrawal from IRA but you need to be careful if you are managing it yourself--if you don't get it right or deviate in any way you could still face 10% penalty.
--If you start payments before the end of this year, they will calculate the amount based on 12/31/2016 balance/IRS age factor--amount paid out over the remaining months of the year. Since you are currently working, it would probably be better to wait until next year. It usually takes a month after retirement date before TSP will have documentation that you are retired.

Retired FERS-VERA/VSIP Considering 72(t) TSP Withdrawal Options

 

[DreamboatAnnie]

Start by reading the book:

https://www.tsp.gov/PDF/formspubs/tspbk02.pdf

Page 11 states "Note: Your annuity payments are not subject to the IRS early withdrawal penalty, even if you are under age 55 when they begin ." It also states, "For more information, read the TSP tax notice “Important Tax Information About Payments From Your TSP Account .”

Link: https://www.tsp.gov/PDF/formspubs/tsp-536.pdf

Best wishes!

 

[James48843]

Page 11 states "Note: Your annuity payments are not subject to the IRS early withdrawal penalty, even if you are under age 55 when they begin ." It also states, "For more information, read the TSP tax notice “Important Tax Information About Payments From Your TSP Account .”

Link: https://www.tsp.gov/PDF/formspubs/tsp-536.pdf

Best wishes!

Good read- here is that document:

https://www.tsp.gov/PDF/formspubs/tsp-536.pdf


Sent from my iPhone using TSP Talk Forums

 

[evilanne]

Based on page 10 of https://www.tsp.gov/PDF/formspubs/tspbk02.pdf, you have to use TSP-70 for annuity--didn't see any option for partial withdrawal annuity through TSP. Not sure I would recommend annuity with current interest rates but the Retirement Income Calculator has separate tab where you can compare life expectancy option to annuity options. Based on Desperate for Help thread, you could do partial rollover to IRA and then purchase annuity from outside company.

 

[DigginGator]

Thanks so much for the insightful information. I am looking at this option as this is what I was thinking about and simply being able to lower my monthly allocation at some point to preserve some of the funds. This option seems like it would work, although the waiting till 59.5 seems like a while. Definitely a lot to digest in a rather precarious position, but hey, I am pretty excited about the future! TY!

 

[DreamboatAnnie]

I read that to mean you have to BUY an annuity through the Government. My understanding is that you do not need to buy the Annuity using your entire balance, so I think that could be a way of limiting the ouch! But I could be wrong as I have not yet retired and studied it hard.

I am thinking its possible you can buy an annuity with a portion and then take equal payments or a certain set amount thereafter---but again not certain. I would read through everything very slowly and carefully and talk to someone that really knows TSP retirement options. But you must assess how much that person knows, since there are a lot of folks who do not. I would also always ask to see it in writing. Terminology is very important and tricky.

 

[evilanne]

House Passes TSP Modernization Act

Not sure how long it will take for them to implement anything, but sounds like progress - the bill says "As soon as is administratively feasible, as determined by the Executive Director of the Federal Retirement Thrift Investment Board, the Executive Director shall prescribe regulations to carry out the amendments made by this section." https://www.congress.gov/bill/115th-congress/senate-bill/873/text

This might allow you to make a partial withdrawal (rollover) after starting payments to reduce the amount once life expectancy payments start and reduce payout once Supplement Payments kick in...time will tell.

 

[DigginGator]

This is indeed good news. Hopefully it will happen sooner rather than later.

 

[2moryrs]

According to the NARFE Legislative webinar yesterday, it is thought that it will be two years (or more) before the changes can be written into regulations.

NARFE members can view webinars for free. Paying for a webinar at $39.95 gets you the webinar and one year's membership to NARFE. National Active and Retired Federal Employees Association (NARFE)
This is an organization that looks after your earned pay and benefits. Any current employee or retiree can join. It is $40 for current employee; Retirees get a 15% discount when signing up for automatic withdrawal from annuity. No longer have to join a chapter; however, we have a lot of folks out there building relationships with local (State) political people that some times run for National office positions. Lots of good done by the organization to protect our earned benefits from the sharks (Congress men) in Washington, D.C.

Okay, off my soapbox now. I do believe in their mission: Tireless Advocacy, Trusted Advice.
By the way, we are NOT a union.

 

[dhstdog]

According to the NARFE Legislative webinar yesterday, it is thought that it will be two years (or more) before the changes can be written into regulations.

NARFE members can view webinars for free. Paying for a webinar at $39.95 gets you the webinar and one year's membership to NARFE. National Active and Retired Federal Employees Association (NARFE)
This is an organization that looks after your earned pay and benefits. Any current employee or retiree can join. It is $40 for current employee; Retirees get a 15% discount when signing up for automatic withdrawal from annuity. No longer have to join a chapter; however, we have a lot of folks out there building relationships with local (State) political people that some times run for National office positions. Lots of good done by the organization to protect our earned benefits from the sharks (Congress men) in Washington, D.C.

Okay, off my soapbox now. I do believe in their mission: Tireless Advocacy, Trusted Advice.
By the way, we are NOT a union.

They will take every second of the 24 months they were given!

 

[alevin]

It would be a miracle if they do get it done in less than 2 years. Can Congress hold them in contempt if they don't? legislation says do it in 2 years or less.....