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

[evilanne]

Actual retirement date: 29 Feb 2016 (Leap year seamed appropriate since everyone said they would never offer it to our career series.)
Planned retirement datewas July 2020 MRA
My organization offered VERA/VSIP end of FY15;
After submitting application, requested agency retirement estimate (Swapped AL taken for bereavement to SL IOT reduce SL balance that would not count & take more time off for holidays)
VERA/VSIP on hold decision placed on hold to FY16 CRA-no new expenditures even if it saves money.
FEHB Open Season Changed Insurance from BCBS to Foreign Service Benefit Plan (lower cost but must be current employee)
Sent in retirement Package after FEHB change registered in system
Army Benefits Center (ABC) recommend 60-90 advance but only start working package 30-45 days prior to actual retirement date. Last day of work 29 Feb 2016 (mid pay period) Age 51; 28.75 years FERS; I will get supplement at MRA.
Maximize TSP contributions in short period is challenging
Received payment of leave in final pay check

OPM processing has improved—no major complaints
—April 1, 2016 received partial payment from OPM (3 months)
—Mid June adjustment received and full payment started in July. My experience similar to what others have posted. Timing of notices & booklet and OPM web site info sometimes didn’t coincide.

VSIP Delay Issue: Contacted ABC re: VSIP, referred me to DFAS but they had no pending payment. April 8 after run around & no sign of VSIP payment in MyPay, I contacted local HR office that contacted ABC, who claimed they were missing form & it would be 4 weeks to process once they got it. (Provided documentation of form faxed to ABC 01 Feb. Due to their lies, I suggested that I may have to contact my congressional representative if payment wasn’t expedited, ABC supervisor contacted me to provide status on several occasions). Due to ABC’s error, DFAS issued check 04/28/16 rather than direct deposit.

Lessons that may be helpful to others
—ABC personnel vary, keep calling until you get an adequate answer. Few people understand how DFAS & our payroll system works—it is what is programed into the computer system that counts.
—You can apply 100% of your pay to TSP if you’re ok with no paycheck; if you use a percentage or dollar amount that exceeds available pay, no deduction will be made;
—VSIP require RPA issued by your organization that has funds to pay it.
—Make sure you have user name/password for systems you may need in retirement, e.g. DFAS MyPay
—Make sure you have copies of everything submitted, preferably in electronic format.
—No agency wants a congressional inquiry
—If your planning to move after retirement, use a national Fee for Service plan, which I prefer anyways.
—Under 55, only way to access TSP without penalty is life expectancy payments

TSP Withdrawal Strategy under 55 & MRA
I’m currently trying to figure out a plan for TSP withdrawals—Soonest will be 2017. I will be locked into life expectancy withdrawals until age 59.5 once I start. I am ok with where I am right now. Since I will not get the supplement until 2020, it may be worthwhile to do a partial rollover in December 2019 to an IRA to lower the TSP monthly payments. I have always been open to transferring a portion of my account outside of TSP with adequate reason to do so. Not sure if this will work or not. If permissible, I can either leave it as an IRA or convert some gradually to Roth. Any thoughts?

 

[evilanne]

Tools & References
Calculators:
TSP's Retirement Income Calculator https://www.tsp.gov/PlanningTools/Calculators/retirementCalculator.html
72(t) Calculators https://72t.net & http://www.dinkytown.net/java/Retire72T.html
Marginal Tax Rate Calculatorhttps://www.dinkytown.net/java/TaxMargin.html
What is my life expectancy? http://www.calcxml.com/do/ins02
General Info:
TSP Withdrawals After Leaving Federal Service: https://www.tsp.gov/PlanParticipation/LoansAndWithdrawals/withdrawals/index.html & https://www.tsp.gov/PDF/formspubs/tspbk02.pdf
Withdrawals After Leaving Federal Service:https://www.tsp.gov/PlanParticipation/LoansAndWithdrawals/withdrawals/index.html& https://www.tsp.gov/PDF/formspubs/tspbk02.pdf
Investopedia Rule 72(t)
http://www.investopedia.com/terms/r/rule72t.asp
Turning Your TSP Into an Income Stream http://www.fedsmith.com/2016/07/12/turning-your-tsp-into-an-income-stream/
IRS Tax Topics:
Retirement Topics - Exceptions to Tax on Early Distributionshttps://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions
Tax Topic 557 - Additional Tax on Early Distributions from Traditional and Roth IRAs: https://www.irs.gov/taxtopics/tc557.html
Tax Topic 558- Additional Tax on Early Distributions from Retirement Plans Other Than IRAs https://www.irs.gov/taxtopics/tc558.html
IRS Publications:
721, Tax Guide to U.S. Civil Service Retirement Benefits https://www.irs.gov/publications/p721/ or https://www.irs.gov/pub/irs-pdf/p721.pdf
575, Pension and Annuity Income https://www.irs.gov/publications/p575/
590-B, Distributions from Individual Retirement Arrangements (IRAs)—(Appendix B Life Expectancy Tables) https://www.irs.gov/publications/p590b/ or https://www.irs.gov/pub/irs-pdf/p590b.pdf
Forms:
TSP-3, Designation of Beneficiary https://www.tsp.gov/PDF/formspubs/tsp-3.pdf
TSP-70, Request for Full Withdrawal https://www.tsp.gov/PDF/formspubs/tsp-70.pdf

 

[Buster]

TSP Withdrawal Strategy under 55 & MRA
I’m currently trying to figure out a plan for TSP withdrawals—Soonest will be 2017. I will be locked into life expectancy withdrawals until age 59.5 once I start. I am ok with where I am right now. Since I will not get the supplement until 2020, it may be worthwhile to do a partial rollover in December 2019 to an IRA to lower the TSP monthly payments. I have always been open to transferring a portion of my account outside of TSP with adequate reason to do so. Not sure if this will work or not. If permissible, I can either leave it as an IRA or convert some gradually to Roth. Any thoughts?

Just and idea..

When I retired at 55 (CSRS-2010)..I took my TSP funds and rolled them over into an IRA account and let a financial management firm take control...I don't even make contributions any more..And I don't worry about it anymore either, just waiting til I'm 72, when I'll be forced to take my annuities ...They take care of my so-called portfolio and guaranty an annual yield of 5% no matter what the market is doing....so far, I've been seeing a 7% to 9% yield annually and so it grows..Yes I do pay a 1% brokerage fee...Pennies on the dollar..no muss no fuss.

 

[MDWVcats]

I am 56 with 33 years and just beginning to look at possibilities. Any chance that you could let us know who the financial management firm is? Having a guarantied yield of 5% sounds great....

 

[evilanne]

Just and idea..

When I retired at 55 (CSRS-2010)..I took my TSP funds and rolled them over into an IRA account and let a financial management firm take control...I don't even make contributions any more..And I don't worry about it anymore either, just waiting til I'm 72, when I'll be forced to take my annuities ...They take care of my so-called portfolio and guaranty an annual yield of 5% no matter what the market is doing....so far, I've been seeing a 7% to 9% yield annually and so it grows..Yes I do pay a 1% brokerage fee...Pennies on the dollar..no muss no fuss.

Thank you for responding Buster,

I do have brokerage accounts outside of TSP, however, I think I've done better in my TSP account [annual TSP statement 31 Dec 2015 shows 5 years rate of return 9% even with barely any earnings in 2015; Brokerage account took big hit on oil related assets in 2015] Although there are some instruments with insurance companies tied to the market, they limit your potential gains if they guarantee you not to lose money. They cannot guarantee any specified rate of return with stocks or mutual funds and you pay fees whether you sell at a gain or loss, just look at any fund prospectus.

FERS is much different from CSRS. Under CSRS you are getting probably getting 2/3rds of your High 3 salary, whereas, I am currently getting less than 30%. Based on years of service, my pension is 45% less than what it would be using CSRS calculation (1.5% x 1st 5 years + 1.75% 2nd 5 years + 2% All years>10). The reason for TSP w/matching was to make up part of the difference under our 3 legged stool approach to retirement under FERS, with the last leg being Social Security. Since I'm under my MRA, I have to wait 4 years before I get the supplement and I won't get any COLA on my pension until age 62. Therefore, waiting until RMDs are required at 71.5 isn't a good option under FERS.

Financially, I could probably manage with just the pension for at least a few years since I have some passive income, savings and no mortgage, but it makes more sense to figure out a plan to manage income streams within a certain range. Once you reach 71.5, you have to take RMDs in regular IRAs and TSP and they are designed to be depleted within your life time. The Roth doesn't require RMDs and can be used as an emergency funds later in life (as your IRAs are decreasing) or be passed along to your heirs.

 

[Buster]

WOW Anne!!..seems you've done your homework and have a pretty good grasp of your future finances...

No need to ask for advice here, we should be coming to you for the tips and tricks...Nice going my dear..BTW are you taken?

 

[uscfanhawaii]

Once you reach 71.5, you have to take RMDs in regular IRAs and TSP and they are designed to be depleted within your life time. The Roth doesn't require RMDs and can be used as an emergency funds later in life (as your IRAs are decreasing) or be passed along to your heirs.

And so you now have touched on another example of the poor withdrawal options of TSP!

TSP will not let you withdraw only Traditional TSP funds. So even though you are not required to withdraw TSP Roth funds by federal law, TSP will only let you withdraw both Traditional and Roth in prorated amounts. Not good!

 

[evilanne]

uscfanhawaii,
I don't have any issues with the withdrawal options since all of my contributions are traditional and same rules apply whether in TSP or in IRA for me (IRAs provide a little more flexibility than TSP with withdrawals). By the time they introduced Roth option, it didn't make sense for me but I wish I would have learned about advantages of Roth IRAs outside of TSP sooner as you can contribute to both TSP + outside Roth. This year will be last year I can contribute to Roth unless I decide to get a part time job in the future as you can only contribute earned income but I have small IRA that I'm considering transitioning to my Roth. I wish I would have thought about this back in January or February when the market corrected as tax impact would have been less. Reading the different threads have given me a better understanding of the different issues.

For those with Roth in TSP, it is possible to get Roth extracted but it would take some work to set up two separate accounts on the outside. I would suggest transferring traditional back to TSP because the G Fund pays interest while brokers don't pay interest on cash balances. It would be nice if they got rid of the proportional method for transactions and allowed you to designate the fund for withdrawals, which would increase chances of employees remaining in TSP after separation. For loans, they used to make you have a certain amount in the G Fund that would cover the loan amount--it would make sense to do the same for distributions as you wouldn't have to worry about volatility in the stock funds. You could designate the fund annually along with your or for those that put all their funds in a single fund that would be the only option. FRTIB is looking at possible changes to TSP, but unfortunately their process is very slow.

Buster,
I'm still learning and primarily concerned with capital preservation as the market has been difficult to read the last 2 years. Still waiting for a significant correction or signs of real improvement in the economy as I can't afford big losses like what happened in the last recession.
I have 2 nuerotic mutts, an adult:hmmm: son that is trying to find he way and an aging mother, but other than that I'm foot loose & fancy free

 

[evilanne]

I called TSP and found out that once you set up monthly payments (life expectancy), you cannot do a partial withdrawal without doing a full withdrawal so I would have to do a partial withdrawal before setting up payments. It appears that some TSP forms have option to transfer all or a part of monthly payments to an IRA, however, it excludes payments based on life expectancy and payments that will last for 10 or more years. Has anyone with Life Expectancy monthly payments found a way to get around this?

If I do a partial withdrawal to an IRA, my intent is to gradually transfer some (or all) to my Roth IRA. The purpose of adding Roth is (1) to serve as an tax free emergency fund (2) avoiding RMDs at 70.5, (3) to manage taxable income more effectively and (4) tax free growth for benificiary(s). Marginal tax rate should be 25% when I start TSP life expectancy withdrawals, but there is a lot of tax stuff that I don't understand (e.g. What counts as Ordinary Income? How the Tax ranges work when you have both Ordinary Income & Qualified Dividends/LT Capital Gains?). Twenty five percent seems like a lot of tax and my effective tax rate as calculation by Turbo Tax is generally at or under 15%, but that is calculated based on AGI before deductions/exemptions.

If anyone with both Roth & Traditional contributions, what percentage of your accounts are in Roth?

Referencehttps://www.irs.gov/publications/p590a/ch01.html#en_US_2015_publink1000230563 Excerpts:

Converting From Any Traditional IRA Into a Roth IRAAllowable conversions. You can withdraw all or part of the assets from a traditional IRA and reinvest them (within 60 days) in a Roth IRA. The amount that you withdraw and timely contribute (convert) to the Roth IRA is called a conversion contribution.

Application of one-rollover-per-year limitation. Beginning in 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 1-year period regardless of the number of IRAs you own. The limit will apply by aggregating all of an individual's IRAs, including SEP and SIMPLE IRAs as well as traditional and Roth IRAs, effectively treating them as one IRA for purposes of the limit. However, trustee-to-trustee transfers between IRAs are not limited and rollovers from traditional IRAs to Roth IRAs (conversions) are not limited.

Converting From Any Traditional IRA Into a Roth IRA
Allowable conversions. You can withdraw all or part of the assets from a traditional IRA and reinvest them (within 60 days) in a Roth IRA. The amount that you withdraw and timely contribute (convert) to the Roth IRA is called a conversion contribution. If properly (and timely) rolled over, the 10% additional tax on early distributions will not apply. However, a part or all of the distribution from your traditional IRA may be included in gross income and subjected to ordinary income tax.

Periodic distributions. If you started taking substantially equal periodic payments from a traditional IRA, you can convert the amounts in the traditional IRA to a Roth IRA and then continue the periodic payments. The 10% additional tax on early distributions will not apply even if the distributions are not qualified distributions (as long as they are part of a series of substantially equal periodic payments). [This is what I want to do with TSP but cannot]

Income. You must include in your gross income distributions from a traditional IRA that you would have had to include in income if you had not converted them into a Roth IRA. These amounts are normally included in income on your return for the year that you converted them from a traditional IRA to a Roth IRA.

 

[alevin]

Hi Anne, you are finding out why some people choose to pull all of their tsp out into an outside IRA account in one fell swoop. more flexibility on when and how to do withdrawals to manage their funds as they think best. That may or may not be best idea for you, in terms of management fees on funds that you aren't spending right away. though Vanguard management fees are comparably low, but you'd lose access to G fund, where you can never lose money (but can still lose purchasing value) of that money over time.

Qualified dividends are taxed at longterm capital gains rate (for you it sounds like that would be 15% at this point). Ordinary dividends are taxed at regular earned-income tax/short-term capital gains/marginal tax rate (for you it sounds like that would be 25% at this point-marginal rate). TSP withdrawals will only ever be taxed at marginal income tax rates. Any qualified dividends you earn on funds outside tsp would be taxed at the appropriate longterm cap gains rate while any ordinary income from tsp withdrawals would be taxed at marginal rate, as would any ordinary dividends on funds earned outside your iras. tax on dividends are calculated separately from earned income when you do your taxes, and rolled up into total of what you owe as you work through the lines on the 1040.

Here is a link that may be helpful to you on understanding qual dividend/cap gains vs ordinary dividends/interest/earned income and what falls into what category and how it affects your tax calculations:

Introduction to Qualified Dividends

 

[evilanne]

Thanks for the link Alevin. I'm actually toying with idea of taking H&R Block's tax course to get better understanding of tax issues.
I have a better understanding now as to why many dislike TSP after they leave federal service. I still think its low cost index fund options and the security of the G Fund are excellent. I don't like the the fees associated with going through a broker, where I currently have several accounts. I need to look into what impact the DoL rule implementation will have on Discount Brokerages. For IRAs in a fee based account, I believe it is currently ~1% of account balance annually in addition to any annual/hidden fees imbedded in any fund you may invest in but no transactions costs for buying/selling. A lot depends on how much trading is done and the actual returns achieved, but many brokers seem to put people in well known fund families, reliable dividend stocks &/or bonds with low to moderate risk that typically require little management, IMO. Decisions...decisions...good thing I have time to examine different alternatives.

 

[uscfanhawaii]

If you like the TSP options, then you must also like the index funds that the TSP funds mimic. Bond Fund, S&P 500, Small Cap, Int'l Fund. Those are all available in outside IRAs and do not require high Brokerage Fees. My outside IRA funds are with Vanguard (and there are many others available too). Sure, you could use a broker to pick special stocks, or even use a Managed Fund that have higher fees. Point is....you CAN do that, but don't HAVE to. Together with the better withdrawal options that you recognize, you can see why the majority of retirees take everything out of TSP and move it to an outside IRA. It also explains why TSP has a big banner on it's home page, urging retirees to leave their funds in TSP and part of their big effort to convince people to stay.

I wrote to TSP (maybe I should have written to the FRTIB directly) and told them that I thought they should be trying to help Fed workers to make the best decisions for the worker, and not just try to convince retirees to stay. To me that should be a fiduciary duty, not an advertising blitz. But their response was just that they could only do what was allowed by Congress, and altho changes were being proposed, they take a long time to be approved and put into action. So why don't they tell retirees to take their $$ out until the rules are more beneficial to the worker? But I did not respond to them....they seem to be missing the point.

One other idea....take MOST out of TSP. Then, when (and if) they change the rules, put it back in. As long as you maintain a TSP account in retirement, you can transfer IRAs INTO the TSP. So do it when it becomes advantageous to do so.

Just expressing SOME of my frustrations with TSP. I was SO EXCITED when I first heard that TSP would be instituting a Roth option. Then I was SO DISAPPOINTED when I found out the rules that were put in place restricting the Roth Option. All my Roth $$ are in an outside IRA. None in TSP.

 

[evilanne]

I'm going to keep the bulk of my money in TSP...just need to determine (1) how much to take out for the partial withdrawal (2) whether to open new account or use existing IRA with broker and (3) when to start monthly payments. Once I start the monthly payments based on life expectancy I'm locked in with that method until age 59.5--same rules apply with TSP or IRA. The only benefit of IRA is frequency of payments (could be quarterly, semiannual or annual vs monthly) as calculated annual amount is the same. It is just simpler doing it with TSP, not having to worry any fees or the calculation being in accordance with IRA rules.

 

[evilanne]

Update:
Partial Withdrawal: Back in October, I withdrew approximately 30% of my account as a direct transfer to an IRA. Total process took a few weeks. Faxed TSP Form 77 ~ mid October, Online Message in TSP account indicated they received request, they were reviewing and it gave me option to cancel for about 3 days, another message indicated when they would disperse the funds, actual withdrawal was October 25, a check was sent by mail to designated address (wish they would use electronic funds transfer); it arrived November 1st.

I plan to eventually converting IRA to Roth over time. Last September I converted an old IRA to my Roth IRA.

Full Withdrawal based on life expectancy. Faxed TSP form 70 on 29 December. It was rejected 5 January. I used a gel pen to sign/date when I got it notarized…never use a gel pen on any TSP form. They interpreted 1 in 2017 to be a 0 due to light trace from the gel pen and the side of the little boxes. The Notary’s date was very clear (no boxes).

Rejected Full Withdrawal Request.
Your full withdrawal request was rejected during processing. An explanation has been sent to you at your address of record.

I went over existing 1 and 7 with a different pen and faxed again on Monday 1/8 and followed up several times this week. Thursday night status:

Pending Full Withdrawal Request submitted 01/11/2018.
You have a pending full withdrawal request (View Withdrawal Request) that should be effective as of close of business 01/12/2018. You may cancel this request until 12:00 noon, Eastern time, that day.

Based on numerous calls to TSP, I am convinced that TSP goes out of their way to discourage you from withdrawing any of your money. It is about 50/50 on getting good/bad information from the person answering the phone. My pet peeve is they have to verify everything in the summary information included on each TSP form prior to answering any question regarding your account.

Luckily, I won't have to deal with them again for at least a few years once my monthly payments process.

 

[RazorCat]

If you like the TSP options, then you must also like the index funds that the TSP funds mimic. Bond Fund, S&P 500, Small Cap, Int'l Fund. Those are all available in outside IRAs and do not require high Brokerage Fees. My outside IRA funds are with Vanguard (and there are many others available too). Sure, you could use a broker to pick special stocks, or even use a Managed Fund that have higher fees. Point is....you CAN do that, but don't HAVE to. Together with the better withdrawal options that you recognize, you can see why the majority of retirees take everything out of TSP and move it to an outside IRA. It also explains why TSP has a big banner on it's home page, urging retirees to leave their funds in TSP and part of their big effort to convince people to stay.

I wrote to TSP (maybe I should have written to the FRTIB directly) and told them that I thought they should be trying to help Fed workers to make the best decisions for the worker, and not just try to convince retirees to stay. To me that should be a fiduciary duty, not an advertising blitz. But their response was just that they could only do what was allowed by Congress, and altho changes were being proposed, they take a long time to be approved and put into action. So why don't they tell retirees to take their $$ out until the rules are more beneficial to the worker? But I did not respond to them....they seem to be missing the point.

One other idea....take MOST out of TSP. Then, when (and if) they change the rules, put it back in. As long as you maintain a TSP account in retirement, you can transfer IRAs INTO the TSP. So do it when it becomes advantageous to do so.

Just expressing SOME of my frustrations with TSP. I was SO EXCITED when I first heard that TSP would be instituting a Roth option. Then I was SO DISAPPOINTED when I found out the rules that were put in place restricting the Roth Option. All my Roth $$ are in an outside IRA. None in TSP.

uscfanhawaii,
I realize this is an older post, but that brings up an interesting point about taking TSP funds that were previously transferred to an outside IRA, and rolling them back into TSP. Of course, there's no readily available information on that option on the TSP site.
But, with their (the TSP board) biggest concern being the mass exodus of retiree's money out of TSP, you'd think they would open up a "reverse rollover" option.
I know I have a qualifying situation with some current investments in a company that will sell in the not too distant future. I currently receive monthly interest payments on my investment at a rate of 12% annually. When the company sells I will, as a limited partner, also receive a dividend based on the percentage my investment represented in relation to the initial valuation of the company at startup. The initial value of the company based on the total amount of investments required for startup was $2.1 million. The last offer we received from an outside investor, and rejected, was $19.2 million. The business has had an average growth rate in sales of 21% per year over the past 6 years. Our best year was 2017 with a growth in sales and clients of 24%. So, we continue to grow exponentially with each passing year. From my discussions over coffee with the CEO recently I'm guessing we're looking for an offer in excess of $25 million before he'll even consider entertaining a sell offer. That's roughly an 1190% increase in the value of the company since startup.
Point being I'm going to have a large chunk of money I have to invest somewhere. And I have no intentions of remaining the current company (Equity Trust) that manages my IRA that's channel to this investment. They suck in every category as a financial institution.
But, they're a necessary evil due to the way the investments are structured.
I would love to roll at least part of that IRA back into TSP with the rest going into an outside IRA with another, more reliable financial institution.
You'd think FRTIB would open up a re-investment option to draw more money from current participants back into TSP.

 

[evilanne]

RazorCat,

You can rollover traditional IRA back into TSP with TSP Form 60. See https://www.tsp.gov/PlanParticipation/EligibilityAndContributions/RolloversTransfers/methods.html You may have to transfer it all into a tIRA and then transfer a portion back to TSP. Once they implement TSP Modernization Act, I'm hoping I can do a 2nd partial rollover to a tIRA in a few years to reduce life expectancy payments for a few years with intent of transferring it all back in after I turn 59.5. This would be allowable based on IRS rules so it should be permitted in TSP when they modernize.

 

[evilanne]

Another Option that would be really nice is if they allowed you to do conversions to Roth within TSP. All that would be required is that they transfer given amount from traditional to Roth and issue a tax form. Based on the proposed changes, and getting rid of the proportional rules and not requiring RMDs on the Roth portion, this would make perfect sense if they want us to keep more of our money in TSP but that may be asking too much

 

[uscfanhawaii]

Originally Posted by uscfanhawaii
If you like the TSP options, then you must also like the index funds that the TSP funds mimic. Bond Fund, S&P 500, Small Cap, Int'l Fund. Those are all available in outside IRAs and do not require high Brokerage Fees. My outside IRA funds are with Vanguard (and there are many others available too). Sure, you could use a broker to pick special stocks, or even use a Managed Fund that have higher fees. Point is....you CAN do that, but don't HAVE to. Together with the better withdrawal options that you recognize, you can see why the majority of retirees take everything out of TSP and move it to an outside IRA. It also explains why TSP has a big banner on it's home page, urging retirees to leave their funds in TSP and part of their big effort to convince people to stay.

I wrote to TSP (maybe I should have written to the FRTIB directly) and told them that I thought they should be trying to help Fed workers to make the best decisions for the worker, and not just try to convince retirees to stay. To me that should be a fiduciary duty, not an advertising blitz. But their response was just that they could only do what was allowed by Congress, and altho changes were being proposed, they take a long time to be approved and put into action. So why don't they tell retirees to take their $$ out until the rules are more beneficial to the worker? But I did not respond to them....they seem to be missing the point.

One other idea....take MOST out of TSP. Then, when (and if) they change the rules, put it back in. As long as you maintain a TSP account in retirement, you can transfer IRAs INTO the TSP. So do it when it becomes advantageous to do so.

Just expressing SOME of my frustrations with TSP. I was SO EXCITED when I first heard that TSP would be instituting a Roth option. Then I was SO DISAPPOINTED when I found out the rules that were put in place restricting the Roth Option. All my Roth $$ are in an outside IRA. None in TSP.

uscfanhawaii,
I realize this is an older post, but that brings up an interesting point about taking TSP funds that were previously transferred to an outside IRA, and rolling them back into TSP. Of course, there's no readily available information on that option on the TSP site.
But, with their (the TSP board) biggest concern being the mass exodus of retiree's money out of TSP, you'd think they would open up a "reverse rollover" option.

Razor,
Thanks for digging up that old quote!
With the new regs, it MAY be time to think about putting funds back in. As Anne said, there is a form for that. But FRTIB still has reluctance to embrace Roth. I think Anne is right....only traditional now. AND, if retired and took out ALL TSP Funds, that's it. Can't go back.

As for Roth, I still recommend an outside IRA. But the new regs will be a step in the right direction. Will have to wait till the new regs come out to see how they implement the new law. Hope it doesn't take the whole 2 years that they were given. I retire the end of this year!

 

[RazorCat]

Sorry if I got a little long winded in my post.
But, thank you so much for clearing up the eligibility requirements for moving IRA funds back into TSP once a person has separated from government service. I honestly wasn’t sure it was an option after retirement. Never thought to look under the Plan Participation page as I was looking over the publications concerning IRA transfers to TSP, and form TSP-60. Clear as mud as always. You almost need a shovel to dig deep enough on the TSP website to find clear, concise answers to simple questions.
I’ll be moving the majority of my investment gains back into TSP, with about 25% going to a different outside self-directed IRA.
Would love to hear TSP’s reasoning behind not allowing Roth transfer. I’ve considered converting some money to an outside Roth, but really don’t see an advantage at my age (60). My tax burden should remain constant, or lessen, as I go forward. Just have to re-adjust earned income slightly each year to keep taxes as low as possible.
Thanks again for the information. Another reason I love this site. It’s a wealth of investing information.

 

[evilanne]

Update: I haven't taken advantage of any of the new rules that the new law give us, but I like the flexibility available. I'm currently taking life expectancy payments that get calculated each year and even with the withdrawals, I have more money in my TSP account than when I started. With the new rules, Roth TSP makes more sense and it is good to have a mix in both traditional and Roth accounts in retirement.

I agree with uscfanhawaii, I really like the outside Roth IRA option in addition to TSP. It is a good emergency fund since you can withdraw your contributions (after tax) without any penalty and some of the funds may be withdrawn without penalty if for one of the stated exceptions. Since there is a 5 years rule attached to Roth accounts that may impact you and/or your beneficiaries, I would suggest contributing to both TSP Roth and an outside Roth sooner rather than later, even if it is for a small amount (not sure if 5 year rule impacts TSP Roth withdrawals). You can still open an outside Roth for 2019 as long as you fund it before April 15, 2020.