FERs Retirees, anyone?

[burrocrat]

During weekends, I have plenty time to read the Forum and check on other tsptalkers' thread. One of the things that I kept reading was about TSP roll over to an outside IRA. Not knowing the advantages of a roll over, I called Vanguard. A youthful voice answered, must be an intern. I asked him if he is familiar with the TSP plan and that I would like to find out about the advantages of rolling over my TSP to a Vanguard IRA. He didn't bullshit me and he was honest to say that other than it is like a 401K, he is not really familiar with TSP, but that he can give me advantages of the IRA.

We talked for 10 minutes, and the only thing that my brain cells was able to retain was that with an IRA I can change my withdrawal schedule anytime and it can be stopped or continued anytime. For me, that is a great advantage of the roll over. With TSP, we can only change the withdrawal schedule once a year.

However, IRA withdrawals can only be made after 591/2. With TSP, you can withdraw upon retirement even if you are not 59 1/2.
Ergo, I will leave my Money with TSP, do the much needed withdrawals until I am 59 1/2 and then roll over to an IRA.

don't forget about the parts where outside of tsp, you can trade realtime with no four hour delay and more than twice a month. there is probably some value in that.

also consider that if you invented and tried to sell an investment vehicle that locked away your money except for two days per month with a 4 hour transaction delay, you would go busto..

 

[Maricar19]

don't forget about the parts where outside of tsp, you can trade realtime with no four hour delay and more than twice a month. there is probably some value in that.

Not your norm, but you gave a very good insight!

 

[Maricar19]

Advantages of a TSP roll over to an IRA (at 59 1/2):
1. IRA- you can change your withdrawal schedule/amount anytime. TSP has a limit - once a year and must be done at a certain time frame. (I think, October or November)
2. Real time trading unlike TSP- by 12 noon.
3. Unlimited Trading- unlike TSP, only 2x a month plus IFTs to G.
4. More diversification of your investments unlike TSP with only G F S C I and Target funds(Life)

Anything else?

p.s. I noted 59 1/2 because if you retire early, you can start withdrawing with TSP, but not IRA.

 

[Boghie]

Advantages of a TSP roll over to an IRA (at 59 1/2):
1. IRA- you can change your withdrawal schedule/amount anytime. TSP has a limit - once a year and must be done at a certain time frame. (I think, October or November)
2. Real time trading unlike TSP- by 12 noon.
3. Unlimited Trading- unlike TSP, only 2x a month plus IFTs to G.
4. More diversification of your investments unlike TSP with only G F S C I and Target funds(Life)

Anything else?

p.s. I noted 59 1/2 because if you retire early, you can start withdrawing with TSP, but not IRA.

Kinda part of (1) 'you can change your withdrawal schedule/amount anytime'. Let us say that you need to buy a car. If you have a scheduled TSP disbursement you will have to finance it within the income stream you defined before you had to buy the car. With an IRA just take more out and buy it in cash. Maybe reduce your monthly take for a while to balance things out - maybe not. Kinda got to be more responsible because of the options presented. Look at medical expenses for a similar issue.

Personally, I would annuitize an amount that guarantees a desired income while offloading the risk to a larger entity that deals in longer timeframes (that is 'pensionizing' some of my assets). The rest would remain invested in various 'Buckets of Money'. Those buckets would be an asset allocation held in a self-directed IRA.

Don't need to be 100% locked into an annuity or 100% sitting in the S Fund. I will probably be sitting with 1/3 annuitized (maybe 3%/year), 1/3 sitting in high quality bonds and REITs (6%/year), and the final 1/3 sitting in equities (all types together in a selected allocation expecting about 9% - 10%/year). Not now, when I retire...

 

[Maricar19]

Kinda part of (1) 'you can change your withdrawal schedule/amount anytime'. Let us say that you need to buy a car. If you have a scheduled TSP disbursement you will have to finance it within the income stream you defined before you had to buy the car. With an IRA just take more out and buy it in cash. Maybe reduce your monthly take for a while to balance things out - maybe not. Kinda got to be more responsible because of the options presented. Look at medical expenses for a similar issue.

Personally, I would annuitize an amount that guarantees a desired income while offloading the risk to a larger entity that deals in longer timeframes (that is 'pensionizing' some of my assets). The rest would remain invested in various 'Buckets of Money'. Those buckets would be an asset allocation held in a self-directed IRA.

Don't need to be 100% locked into an annuity or 100% sitting in the S Fund. I will probably be sitting with 1/3 annuitized (maybe 3%/year), 1/3 sitting in high quality bonds and REITs (6%/year), and the final 1/3 sitting in equities (all types together in a selected allocation expecting about 9% - 10%/year). Not now, when I retire...

I forgot about big withdrawals... The Vanguard dude mentioned that. Another plus for IRA. TSP allows you only 1 "big" withdrawal and the rest are monthly payments. Sorry, I am not explaining this clearly. Just check on this thread the withdrawal options.

Thanks Boghie. Good diversification plan.

 

[Maricar19]

Advantages of a TSP roll over to an IRA (at 59 1/2):
1. IRA- you can change your withdrawal schedule/amount anytime. TSP has a limit - once a year and must be done at a certain time frame. (I think, October or November)
2. Real time trading unlike TSP- by 12 noon.
3. Unlimited Trading- unlike TSP, only 2x a month plus IFTs to G.
4. More diversification of your investments unlike TSP with only G F S C I and Target funds(Life)
5. With IRA, you can withdraw any amount of money anytime. TSP allows you only 1 "big" withdrawal.

Anything else?

p.s. I noted 59 1/2 because if you retire early, you can start withdrawing with TSP asap, but not IRA.

#5 updated...

 

[PessOptimist]

Advantages of a TSP roll over to an IRA (at 59 1/2):
1. IRA- you can change your withdrawal schedule/amount anytime. TSP has a limit - once a year and must be done at a certain time frame. (I think, October or November)
2. Real time trading unlike TSP- by 12 noon.
3. Unlimited Trading- unlike TSP, only 2x a month plus IFTs to G.
4. More diversification of your investments unlike TSP with only G F S C I and Target funds(Life)

Anything else?

p.s. I noted 59 1/2 because if you retire early, you can start withdrawing with TSP, but not IRA.

You get matching funds while working but I think you are approaching this as being a retired .fed.
Is there a safe place to run if you feel the need like the TSP G fund?
What fees are there for moving the money around or having the IRA account? TSP does have management fees but I think they are rolled in to the share prices making the whole two moves essentially “free”.
You are in a different situation than I but it sounds like you got good plan in the works.
PO

 

[Maricar19]

You get matching funds while working but I think you are approaching this as being a retired .fed.
Is there a safe place to run if you feel the need like the TSP G fund?
What fees are there for moving the money around or having the IRA account? TSP does have management fees but I think they are rolled in to the share prices making the whole two moves essentially “free”.
You are in a different situation than I but it sounds like you got good plan in the works.
PO

PO, you are correct...this rollover is contingent upon retirement and only upon reaching 59 1/2.
The vanguard dude said that there are no fees to roll over. (?)
about a safe haven, there probably are some, but I haven't researched that yet. I asked the dude about the money market account, he said it is not FDIC guaranteed.
Management fees, exp ratios, etc. might be higher than TSP's $0.29/$1000

 

[burrocrat]

Anything else?

yeah, if you have a half mil account balance at a private brokerage they will sometimes send around some in a tank top or tight shorts, whichever you prefer, because they want to see you happy.

at tsp you have to buy your own vaseline. and unless you got a prescription first, you can't deduct it from your pretax health savings acount either.

 

[Stoplight]

...this rollover is contingent upon retirement and only upon reaching 59 1/2....

...I asked the dude about the money market account, he said it is not FDIC guaranteed.

Ahhh.....BUT....there’s a way around that, too !

Assuming you have NOT made any partial withdrawals or age-based in-service withdrawals, you can do this :

1. Estimate how much money you need from TSP, from your retirement until age 59.5.

2. Leave that amount in TSP ; Do a one-time partial withdrawal of the rest of your balance, and roll that into the IRA (for all the reasons mentioned above !)

3. Immediately file for a full withdrawal of your TSP balance, using the “series of monthly payments - specific dollar amount” option. Set the dollar amount based on the $ number you came up with in #1 and the time until you reach age 59.5.

This approach allows you that penalty-free income stream from TSP, while giving you the advantages of the IRA now ! You can adjust the TSP monthly amount up or down, as noted, but only once per year...I think they send you the form in November or so, to take effect in January....kinda like “Open Season”

Depending on how your TSP investing goes, and/or your adjustment to the monthly amount, you may end up getting a few more months than you estimated.

This is exactly the approach I used, and it’s worked out perfectly for me and the Wife. I retired at age 57, left 2.5 year’s worth in TSP, and have been withdrawing a specific dollar amount. That draws my TSP account down to zero in July, but I’m now 60, so anything we decide we need from the IRA will avoid any withdrawal penalty.

Consider it carefully, though...what worked for us may not be right for anyone else, and it’s awfully hard to “un do” !

RE: FDIC insured...I'd double check that info. In my USAA IRA, the "sweep" account (i.e. cash) is in a FDIC-insured money market account. Perhaps that is because USAA runs a regular bank, too...not sure if Vanguard does that or not ???

HTH !!!


Stoplight...

 

[Maricar19]

Ahhh.....BUT....there’s a way around that, too !

Assuming you have NOT made any partial withdrawals or age-based in-service withdrawals, you can do this :

1. Estimate how much money you need from TSP, from your retirement until age 59.5.

2. Leave that amount in TSP ; Do a one-time partial withdrawal of the rest of your balance, and roll that into the IRA (for all the reasons mentioned above !)

3. Immediately file for a full withdrawal of your TSP balance, using the “series of monthly payments - specific dollar amount” option. Set the dollar amount based on the $ number you came up with in #1 and the time until you reach age 59.5.

HTH !!!


Stoplight...

Maybe Iam not understanding the whole process you outlined. Isn't it that if you do a series of payments less than your life expectancy, you get taxed at 20%? I know you might be able to recoup this when you file your income tax.
But other than taxation, yes- your system is a plausible one. But we'll miss TSP talk.

 

[Skorcher]

During weekends, I have plenty time to read the Forum and check on other tsptalkers' thread. One of the things that I kept reading was about TSP roll over to an outside IRA. Not knowing the advantages of a roll over, I called Vanguard. A youthful voice answered, must be an intern. I asked him if he is familiar with the TSP plan and that I would like to find out about the advantages of rolling over my TSP to a Vanguard IRA. He didn't bullshit me and he was honest to say that other than it is like a 401K, he is not really familiar with TSP, but that he can give me advantages of the IRA.

We talked for 10 minutes, and the only thing that my brain cells was able to retain was that with an IRA I can change my withdrawal schedule anytime and it can be stopped or continued anytime. For me, that is a great advantage of the roll over. With TSP, we can only change the withdrawal schedule once a year.

However, IRA withdrawals can only be made after 591/2. With TSP, you can withdraw upon retirement even if you are not 59 1/2.
Ergo, I will leave my Money with TSP, do the much needed withdrawals until I am 59 1/2 and then roll over to an IRA.

I will be retiring in 2 or 3 years also at about age 57. I thought you had to decide in the first 30 or 60 days of retirement whether you wanted an annuity, a full or partial withdrawal or equal monthly payments (that can only be adjusted once a year). Then you're stuck with that decision for the rest of your life. Will the TSP let me make a full withdrawal after I have been retired two years? I could not find that option in the various TSP publications. Thanks,

 

[Stoplight]

MC,

Yes, TSP withholds 20% from each month's disbursement...but that's not a penalty, and I think the same would happen regardless of the TSP withdrawal method you choose...yes, you recoup via your income tax filing.

Fed tax will also be withheld from your IRA withdrawals, too, although I think you can specify either how many $$$ or what percentage you want withheld, just like you can with your OPM pension check. Can't swear by that statement, though, since we haven't withdrawn from our IRAs yet ! :smile:

Anyone else who has "been there, done that" care to enlighten us ???


Stoplight...

 

[gegor1957]

MC,

Yes, TSP withholds 20% from each month's disbursement...but that's not a penalty, and I think the same would happen regardless of the TSP withdrawal method you choose...yes, you recoup via your income tax filing.

Fed tax will also be withheld from your IRA withdrawals, too, although I think you can specify either how many $$$ or what percentage you want withheld, just like you can with your OPM pension check. Can't swear by that statement, though, since we haven't withdrawn from our IRAs yet ! :smile:

Anyone else who has "been there, done that" care to enlighten us ???


Stoplight...

I retired early and started taking a monthly withdrawal based on life expectancy at 57. With this option it is about a 3.5% withdrawal per year with no penalty for under 59 1/2 and no withholding of taxes. I can change this once into a set amount withdrawal after 59 1/2 without penalty and then once a year adjust the amount from $25 per month to a full withdrawal. I actually use this to slowly transfer funds to a more volatile trading account. The two IFTs per month is a hindrance but I sometimes have a tendency to overextend my risk in the trading account, so the TSP,
at this point in time lets me satisfy my appetite for risk in the trading account without too much risk for the TSP. But as always each situation and individuals risk and skill is different.

 

[Stoplight]

I will be retiring in 2 or 3 years also at about age 57. I thought you had to decide in the first 30 or 60 days of retirement whether you wanted an annuity, a full or partial withdrawal or equal monthly payments (that can only be adjusted once a year). Then you're stuck with that decision for the rest of your life. Will the TSP let me make a full withdrawal after I have been retired two years? I could not find that option in the various TSP publications. Thanks,

Skorcher,

To the best of my knowledge, there is no deadline for making that decision....in fact, TSP is now concerned about why many of us are rolling into IRAs instead of leaving our money in TSP ! BUT...you HAVE to start withdrawing when you get up around 70 or so..."required minimum distribution" !


Stoplight...

 

[Stoplight]

I retired early and started taking a monthly withdrawal based on life expectancy at 57. With this option it is about a 3.5% withdrawal per year with no penalty for under 59 1/2 and no withholding of taxes. I can change this once into a set amount withdrawal after 59 1/2 without penalty and then once a year adjust the amount from $25 per month to a full withdrawal. I actually use this to slowly transfer funds to a more volatile trading account. The two IFTs per month is a hindrance but I sometimes have a tendency to overextend my risk in the trading account, so the TSP,
at this point in time lets me satisfy my appetite for risk in the trading account without too much risk for the TSP. But as always each situation and individuals risk and skill is different.

Gegor,

I stand (partially) corrected !!! Thanks for making me go back and check, wondering if I had missed something about withholding Fed tax

In your case, you are withdrawing based on life expectancy. That must mean your payments are for 10 or more years (120 months). You are allowed to alter your withholding amount.

OTOH, I'm withdrawing at a fixed dollar amount, that WILL NOT last 120 months. Thus, TSP MUST withhold a minimum of 20%...they will graciously allow me to INCREASE that amount, though ! :smile:


Stoplight...

 

[Lindoug]

OK, anyone else feel like me, the more I learn, the less I know & understand?

 

[sniper]

If you move to an IRA do you lose the 5% matching?

 

[uscfanhawaii]

If you move to an IRA do you lose the 5% matching?

NO!!!
That is YOUR $$.

And I would like to add one more advantage to rolling over to an IRA: Tax Diversification.

You can have 2 separate Traditional and Roth accounts. You can take out from the Traditional, but before you get to a higher tax bracket, you can switch to taking out from the Roth to avoid higher taxes.

TSP will automatically take equal amounts from both Traditional and Roth.

 

[Maricar19]

MC,

Yes, TSP withholds 20% from each month's disbursement...but that's not a penalty, and I think the same would happen regardless of the TSP withdrawal method you choose...yes, you recoup via your income tax filing.

Fed tax will also be withheld from your IRA withdrawals, too, although I think you can specify either how many $$$ or what percentage you want withheld, just like you can with your OPM pension check. Can't swear by that statement, though, since we haven't withdrawn from our IRAs yet ! :smile:

Anyone else who has "been there, done that" care to enlighten us ???


Stoplight...

SL, I didn't say penalty, I said 20% tax will be witheld if withdrawals are less than "IRS Life Expectancy" and for other kind of retirees, young LEOs, I think a longer # of years of withdrawals is required, maybe 5 (?)in order to avoid a hefty tax. But of course, with so much to read in the TSP website, I am confused...

the only thing definite that I know is that if withdrawals are less than IRS Life expectancy, tax witheld will be 20%, otherwise, you can dictate how much to withold...