FER's Retiree: When to withdraw from TSP, start Social Security

[jamat7]

Hello all-----I'm 61 years old and a FER's retiree. I'm wondering if someone who's retired got professional help on how/when to take out TSP money and when to start taking social security.
Since we have a three tier system, it can get complicated (Pension/TSP/Social Security). There's a lot to consider, a lot of variables involved. The tax implications can be significant on how you take your money out. I was wondering if the best option would be a CPA? I'm thinking about a one time "fee only" type of thing. If anyone's done this----what type of professional did you see and how much was the fee? I'd appreciate any advice on this.

 

[tsptalk]

Good question, jamat7. I can't help but I'm looking forward to the answer myself.

Welcome back, btw. Six years since your last post.

 

[alevin]

Hello all-----I'm 61 years old and a FER's retiree. I'm wondering if someone who's retired got professional help on how/when to take out TSP money and when to start taking social security.
Since we have a three tier system, it can get complicated (Pension/TSP/Social Security). There's a lot to consider, a lot of variables involved. The tax implications can be significant on how you take your money out. I was wondering if the best option would be a CPA? I'm thinking about a one time "fee only" type of thing. If anyone's done this----what type of professional did you see and how much was the fee? I'd appreciate any advice on this.

Are you familiar with fedcalc.com? It lets you run various scenarios using all your various resources and you deciding when to start each resource. it includes tsp, fers, ss, any outside iras and other accounts you might have stashed away. you input all the data yourself. try it, it might help you figure a few things out before you try to find a fee-for-service person who understands
FERS retirement. I'm FERStoo, looking at going out in another 2-3 years. been running the math using retirement calculator available to me during the employed years.

I created my own spreadsheet to calculate gross cashflow on the most optimal gross income scenario from that calculator generally speaking, and then doing my own subtracting of expected costs of various health, life, longterm care ins, fed taxes, comparable state inc. taxes, prop taxes if I stay here and then later if I move elsewhere in a certain timeframe. It's been helping me a lot to run out the scenario over a number of years to see what kind of actual takehome I'd have for everyday living expenses after all the usual payroll deductions and predictable additional taxes expected based on current pay statements and W-2s etc. and also if have a mortgage into retirement, what cashflow would be needed to cover until paid off. like that. but it started with running various scenarios in the retirement calculator and then picking one that looks the best over life expectancy plus some. and then start running that one out on routine predicted basic retirement expenses through retirement phase.

 

[jamat7]

alevin-----thanks for the info! The "full retirement calculator" might give me something useful. I wasn't aware of this website (although I searched like crazy for calculators!)

Also, for the "Moderator" that replied-----Yes, I've been living the good life for the past 6 years!!! Just for your info----I did find a (reputable) site, Paycheck Calculators | Online Payroll Calculators | Paycheck City. It's simple and very accurate. It will show you your state tax and federal tax on payment info that you input.

I'll tell you, there's a lot to consider. I almost forgot about the RMD of the TSP at age 70 1/2. If you have a bunch of money in your TSP account, your RMD could be very large! This has tax implications. Another thing, under FERS, you have to figure out how much state and federal tax you want taken out. Then there's the basic question---when to start taking Social Security. When you're going to have 3 income streams, there's a lot of variables involved! Also, how much of your social security is taxed (mine will be at 85%). The good thing is, I live in Ohio, and there's no tax on social security.

Bottom line is to really try to get a good handle on this stuff well ahead of time. I thought I had a good plan for how I was going to handle all this until I really started getting into it. I'll be 62 next year (April), and I'm finding I wasn't as prepared (or knowledgeable as I thought!

Thanks again for your replies!

 

[nasa1974]

Hello all-----I'm 61 years old and a FER's retiree. I'm wondering if someone who's retired got professional help on how/when to take out TSP money and when to start taking social security.
Since we have a three tier system, it can get complicated (Pension/TSP/Social Security). There's a lot to consider, a lot of variables involved. The tax implications can be significant on how you take your money out. I was wondering if the best option would be a CPA? I'm thinking about a one time "fee only" type of thing. If anyone's done this----what type of professional did you see and how much was the fee? I'd appreciate any advice on this.

jamat7,

You probably already know this.
Now that you are retired and over 59 1/2 you have two options for your TSP; Partial Withdrawal and Full Withdrawal that allows; a single payment, TSP monthly payments or a Life Annuity.
For Social Security you can start as early as 62 but your full retirement age is 66 and 2 months. If you can wait until 70 you can maximize your Social Security payments.

None of us will tell you what to do since your needs and requirements are different from me or someone else. But like you are asking does someone have any experience they would like to pass along.

My wife has a 401K and I do talk about my TSP account with her advisor once in awhile. I retired 4 years ago (CSRS) and I'm holding off on my TSP for as long as I can. I did take a partial withdrawal to pay off school loans (took a good tax hit) and I'm trying to build my TSP account back up if only the market would cooperate.

Good luck

 

[evilanne]

Jamat7,
Many will roll part or all to an IRA, either an online discount brokerage Top 10 Online Stock Brokers or full service brokerage Best Full-Service Investment Firms Ranked by Investors: J.D. Power. If you roll everything over you cannot go back, so I'd recommend leaving enough to keep the TSP option available. Any financial advisor/broker will want you to roll over the entire amount; but before making a decision, suggest you interview 3-4 different ones and explain your specific situation and discuss your options--what can they do for you? See Choosing an Investment Professional | FINRA.org

I retired early and I'm still trying to figure out when I should begin withdrawals. I plan on doing partial rollover of 10-15% TSP before beginning withdrawals because the TSP rules are currently a bit too inflexable. My broker recommends not accessing social security until full retirement age at 67, but that is too far off to think about & I'd still be working if I followed that her recommendations. I do all my calculations in spreadsheets, you know what your pension is and you can use https://www.ssa.gov/myaccount/ to see what your SSA would be at different ages. TSP has a calculator that is helpful running different scenarios; TSP Calculator Page: https://www.tsp.gov/PlanningTools/index.html; specifically, the TSP's Retirement Income calculator https://www.tsp.gov/PlanningTools/Calculators/retirementCalculator.html shows you what to expect depending on your balance, age you begin withdrawals etc particularly once you reach 70.5 & required minimum distributions. I still need to figure a way to analyze the tax impact for the different options with trying to convert some of the IRA to a Roth that isn't subject to RMDs. Decisions, decisions!

Good luck with whatever path you choose! Happy Trails

 

[BamaAF]

No I did not get professional help - but this is my situation:

I retired at 56 with 37 years (bought my military time/enlisted) ; FERs Supplement + Pension + TSP = same NET as pre-retirement. At that rate TSP will last until 85 years old if I average 5% per year (I am just taking monthy payments from my TSP, did not roll over into IRA or purchase any kind of annuity - TSP allows for immediate withrawal without penalty for normal retirement). I plan on taking SS at 62; My calculations showed that that by taking it at earliest point, I would be in my 80's before I would have received the same amount from SS if I took it later for max monthly payout.

By buying the military time back I gain just under 3K per year over what I would net by leaving it and drawing a military retirement plus FERS retirement (note: I am 30% disabled, so I keep this amount).

 

[RazorCat]

I retired at 56 with 29.5 years Fed LEO time. Took a partial TSP withdrawal simply to cover unexpected expenses, if any, during my first couple of years of retirement. At 58, we took on added expenses of a lakehouse and decided to start taking a monthly TSP withdrawal.
I consulted with the CPA who does my taxes. Based on my income from my pension, FERS supplement, monthly investment returns, and my wife's salary, he helped me determine a monthly amount that wouldn't severely impact my income tax status.
Well worth the one-time $200.00 fee. I was able to start taking enough of a monthly withdrawal to cover our added monthly operating expenses, have a little extra each month I could transfer into my emergency fund money market account, and still break even on income taxes (no additional out-of-pocket) at the end of the year. I'm planning to reduce my monthly TSP withdrawal down to $200.00 per month during this year's TSP election period and start drawing the difference from my IRA account when I turn 59-1/2 in Feb. 2017.
I had my CPA work up the figures on that change when he provided the estimates on my monthly TSP withdrawals.
If in doubt, by all means, consult a professional. Money well spent if for nothing else, peace of mind.

 

[Tiger25]

I have been retired 2.5 years. The first year I elected an $800.00 monthly withdrawal from my TSP balance. I did not need that much so I went for $400.00 and that is where I am now. My thinking is that if I can make between 6 to 8 percent annually on my balance I will be OK. ***I am 60 yrs old. I am under the impression that at age 62, my monthly FERS Annuity Supplement goes away. I need that $700 or so dollars, so I will start to draw SS at 62 and hope that everything stays close to the same. I don't have any mortgage or car payments and I am doing fine believe it or not on around $2,000.00 a month. I have a rainy day savings account which I have had to bite into a few times. My next door neighbor works for Social Security and she says get it while it's here. **I probably did not help anyone with this info but I would appreciated some info about that TSP Annuity Supplement stopping at age 62. That is right isn't it? I was just a GS-07 so I learned how to get by on little. I could have been a contender but lost the will the last six years I was employed. Oh yea, I picked a dollar amount of $400.00 to be taxed on. My CPA does my taxes and I will always pay around $1,000.00 a year on fed and break even on Mississippi taxes. I thank y'all for bringing up this subject for I am uneducated about all this and will do some homework in the future. I worry to much so I try to remember the big things like age 62 and if I make it to the age of 70.5, I will take what's left and roll a big one, I mean roll it over into whatever my man says to roll it in. Geaux Tigers !!!

 

[jamat7]

I have been retired 2.5 years. The first year I elected an $800.00 monthly withdrawal from my TSP balance. I did not need that much so I went for $400.00 and that is where I am now. My thinking is that if I can make between 6 to 8 percent annually on my balance I will be OK. ***I am 60 yrs old. I am under the impression that at age 62, my monthly FERS Annuity Supplement goes away. I need that $700 or so dollars, so I will start to draw SS at 62 and hope that everything stays close to the same. I don't have any mortgage or car payments and I am doing fine believe it or not on around $2,000.00 a month. I have a rainy day savings account which I have had to bite into a few times. My next door neighbor works for Social Security and she says get it while it's here. **I probably did not help anyone with this info but I would appreciated some info about that TSP Annuity Supplement stopping at age 62. That is right isn't it? I was just a GS-07 so I learned how to get by on little. I could have been a contender but lost the will the last six years I was employed. Oh yea, I picked a dollar amount of $400.00 to be taxed on. My CPA does my taxes and I will always pay around $1,000.00 a year on fed and break even on Mississippi taxes. I thank y'all for bringing up this subject for I am uneducated about all this and will do some homework in the future. I worry to much so I try to remember the big things like age 62 and if I make it to the age of 70.5, I will take what's left and roll a big one, I mean roll it over into whatever my man says to roll it in. Geaux Tigers !!!

Tiger25-------Your FERs Supplement WILL stop at age 62. The FERS Supplement was meant to be a "bridge" of income until you reached your minimum Social Security age (62).

Everyone else----thanks for your replies----interesting stuff!

 

[Tiger25]

Thanks jamat7. Happy Friday !! Heading out to a friends deer camp in soon to be 80 degree weather. Cold beer awaits.

 

[weatherweenie]

If you are withdrawing from your TSP, are you having to pay a penalty/fee/extra tax, or did you handle this through a 72t?

Also, you said that you initially were withdrawing $800, then changed to $400/month. I thought, especially with early retirement, once you commit to withdraw an amount, you were not able to change, increase/decrease the amount of the withdrawal?

I have been retired 2.5 years. The first year I elected an $800.00 monthly withdrawal from my TSP balance. I did not need that much so I went for $400.00 and that is where I am now. My thinking is that if I can make between 6 to 8 percent annually on my balance I will be OK. ***I am 60 yrs old. I am under the impression that at age 62, my monthly FERS Annuity Supplement goes away. I need that $700 or so dollars, so I will start to draw SS at 62 and hope that everything stays close to the same. I don't have any mortgage or car payments and I am doing fine believe it or not on around $2,000.00 a month. I have a rainy day savings account which I have had to bite into a few times. My next door neighbor works for Social Security and she says get it while it's here. **I probably did not help anyone with this info but I would appreciated some info about that TSP Annuity Supplement stopping at age 62. That is right isn't it? I was just a GS-07 so I learned how to get by on little. I could have been a contender but lost the will the last six years I was employed. Oh yea, I picked a dollar amount of $400.00 to be taxed on. My CPA does my taxes and I will always pay around $1,000.00 a year on fed and break even on Mississippi taxes. I thank y'all for bringing up this subject for I am uneducated about all this and will do some homework in the future. I worry to much so I try to remember the big things like age 62 and if I make it to the age of 70.5, I will take what's left and roll a big one, I mean roll it over into whatever my man says to roll it in. Geaux Tigers !!!

 

[evilanne]

If you are withdrawing from your TSP, are you having to pay a penalty/fee/extra tax, or did you handle this through a 72t?

Also, you said that you initially were withdrawing $800, then changed to $400/month. I thought, especially with early retirement, once you commit to withdraw an amount, you were not able to change, increase/decrease the amount of the withdrawal?

At age 59.5, you have the flexibility of selecting the amount. Under 72T, life expectancy calculation, your amount will change each year based on the end of year balance and age factor--both change. There are alternate methods but with low interest rates, my understanding that there really isn't that much difference with the other Substantially Equal Periodic Payments (SEPP) methods. If you begin 72T payments, you have to keep doing it for 5 year or until 59.5, whichever is longer. see Rule 72(t) Definition | Investopedia & https://www.irs.gov/retirement-plan...garding-substantially-equal-periodic-payments

 

[GUCHI]

I just got confirmation that my tsp full withdrawal was complete and transferred to an IRA, under the advisement of my financial advisor. He is very sharp and has some other options for me as well including a life insurance policy that will bring me 7% and have a cash value. I trust him completely so now I will not have to worry about the market swings. It's literally all in his hands. I'm 57 now and retired 2 years ago and I don't anticipate needing the money but he says I will be making money that I can withdraw for vacation trips. Time will tell. It really feels good to have a professional who knows what he is doing to give me peace of mind. Time will tell, since as I speak I'm working on getting life insurance and once I do I will cancel my federal life insurance. And ohhhh the new insurance with 7% minimum gain/yr and cash value will cost me basically the same as I'm paying for fed life insurance, no brainer to me.

 

[tsptalk]

Good luck GUCHI. I'm not a big fan of whole life insurance policies, but if it put you in a comfortable place, I guess that's all that matters.

 

[jamat7]

If you are withdrawing from your TSP, are you having to pay a penalty/fee/extra tax, or did you handle this through a 72t?

Also, you said that you initially were withdrawing $800, then changed to $400/month. I thought, especially with early retirement, once you commit to withdraw an amount, you were not able to change, increase/decrease the amount of the withdrawal?

weatherweenie----you can change how much money you get a month with TSP form 73. You can do this each year between October 1st to December 26th. The change will take place the following year. The minimum dollar amount you can take out is $25 a month.

 

[clester]

If you are withdrawing from your TSP, are you having to pay a penalty/fee/extra tax, or did you handle this through a 72t?

Also, you said that you initially were withdrawing $800, then changed to $400/month. I thought, especially with early retirement, once you commit to withdraw an amount, you were not able to change, increase/decrease the amount of the withdrawal?

If you are under 59.5 years old and change your 72t monthly payment it will trigger penalties for all the years you used that rule. After 59.5 you can do the yearly change without penalty.

 

[GUCHI]

I took the 72t route, with advisement from adviser.

 

[VegasTSP]

Are you able to write a check to the TSP to cover your years age 50 catch up contribution if you retire mid year? or is it just payroll deductible only?

 

[alevin]

sorry to be bearer of bad news, vegas. payroll deductions only.