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Retirement Withdrawal Options... Guidance Please
- Thread starter dave95sps
- Start date
Hello Stoplight, I appreciate you sharing your experience, but I dont understand this part
"I'm withdrawing as the "full withdrawal" with a specified monthly amount."
Welcome, Dave95 !
I see you've entered the murky world of the "how much can I withdraw ?" question...believe me ; it's an art, not a science ! Everybody's situation is different
The short answer to your question is...figure out your yearly rate of return, and use the specified monthly withdrawal amount, adjusted annually. In fact, I have my TSP-73 in front of me right now ! That's the form used for changing your monthly distribution. As you noted, when you hit that RMD age, you'll need a new strategy to preserve your principal, regardless of the tax-deferred investment vehicle.
I assume you've already done all the basics, like estimate your expenses first, and the source(s) of income to meet those expenses (your pension, Wife's pension, Wife's 403(b) (?), Social Security, etc), and you're still a little short....thus, the need to tap your TSP now. In my case, the Wife was also a school Teacher.
My 2 pieces of advice ? First...if your Wife just retired, wait a while and see how your expenses shake out. For instance, I was surprised at how our gasoline use dropped, after neither of us were driving to work ! Also, it's nice not paying a Social Security tax anymore ! OTOH, the amount we're spending on her hobbies skyrocketed :nuts:
Second : Seriously consider rolling your TSP into an IRA, as Birch recommended. You can then have a LOT more flexibility on where your money is invested ; you can be as active or passive as you want ; and the best part...you can withdraw whatever amount you want, whenever you need it (like for 1 of those home maintenance bills !). Of course, you'll pay tax, and you'll still have to deal with an RMD down the road. Many on the Board will argue the pros and cons about that approach, and there are good reasons to go either way, so you have to look at it from your own perspective. Be careful, though, because with some TSP withdrawal decisions, there's no going back !
For me, we don't have Kids, or anyone else we want to make rich when we die, so "estate planning" wasn't a factor.
We rolled the Wife's 403(b) into an IRA ; took the one-time "partial withdrawal" and rolled most of my TSP balance into an IRA ; and kept a small balance in my TSP, based on an estimate of what we'll need over the next 3 years, which I'm withdrawing as the "full withdrawal" with a specified monthly amount. That makes sense for us, because I avoid the tax penalty on the distribution because I'm not yet 59 1/2 (like I'd have on the IRA). For you both, that's not an issue, since you're 65...
Anyway...best of luck ! Read through some of the other threads, and ask questions ! LOTS of good discussions about homes, paying off mortgages, life insurance, etc etc, and plenty of people willing to share their knowledge and experience !
Stoplight...
"I'm withdrawing as the "full withdrawal" with a specified monthly amount."
Welcome, Dave95 !
I see you've entered the murky world of the "how much can I withdraw ?" question...believe me ; it's an art, not a science ! Everybody's situation is different
The short answer to your question is...figure out your yearly rate of return, and use the specified monthly withdrawal amount, adjusted annually. In fact, I have my TSP-73 in front of me right now ! That's the form used for changing your monthly distribution. As you noted, when you hit that RMD age, you'll need a new strategy to preserve your principal, regardless of the tax-deferred investment vehicle.
I assume you've already done all the basics, like estimate your expenses first, and the source(s) of income to meet those expenses (your pension, Wife's pension, Wife's 403(b) (?), Social Security, etc), and you're still a little short....thus, the need to tap your TSP now. In my case, the Wife was also a school Teacher.
My 2 pieces of advice ? First...if your Wife just retired, wait a while and see how your expenses shake out. For instance, I was surprised at how our gasoline use dropped, after neither of us were driving to work ! Also, it's nice not paying a Social Security tax anymore ! OTOH, the amount we're spending on her hobbies skyrocketed :nuts:
Second : Seriously consider rolling your TSP into an IRA, as Birch recommended. You can then have a LOT more flexibility on where your money is invested ; you can be as active or passive as you want ; and the best part...you can withdraw whatever amount you want, whenever you need it (like for 1 of those home maintenance bills !). Of course, you'll pay tax, and you'll still have to deal with an RMD down the road. Many on the Board will argue the pros and cons about that approach, and there are good reasons to go either way, so you have to look at it from your own perspective. Be careful, though, because with some TSP withdrawal decisions, there's no going back !
For me, we don't have Kids, or anyone else we want to make rich when we die, so "estate planning" wasn't a factor.
We rolled the Wife's 403(b) into an IRA ; took the one-time "partial withdrawal" and rolled most of my TSP balance into an IRA ; and kept a small balance in my TSP, based on an estimate of what we'll need over the next 3 years, which I'm withdrawing as the "full withdrawal" with a specified monthly amount. That makes sense for us, because I avoid the tax penalty on the distribution because I'm not yet 59 1/2 (like I'd have on the IRA). For you both, that's not an issue, since you're 65...Anyway...best of luck ! Read through some of the other threads, and ask questions ! LOTS of good discussions about homes, paying off mortgages, life insurance, etc etc, and plenty of people willing to share their knowledge and experience !
Stoplight...
Stoplight
Active member
Dave95,
You're welcome ! I DO tend to be rather...ummm..."verbose", when I respond to questions like yours
I hope to provide the most info I can, as well as explain my "real-world" experience, rather than what all the books and pamphlets say...it's that "pay it forward" thing...many here have helped me, too !Besides...I'm retired ! I have nothing better to do than write lengthy posts
You sound like you've done the right thing, and continue to do the right thing for the future of both your Wife and Kids ! You're a "good person" ! Search around the Board for some of the discussions about buying term life insurance to provide an "estate" for the Wife and Kids...that's an interesting option I never thought of until I saw it here on the Board !
Also, (and I may be preaching to the choir !)...as prior service, check out USAA. Both the Wife and my self-directed IRA's are with them, as well as many other products. Yes, there are other companies with IRA products, that have better-performing funds, or cheaper fees, or longer trading hours, etc...but I've never found anything yet that I wanted to buy for our IRA's that I haven't been able to acquire through USAA, and their customer service is top-notch ! For example, I hold some PIMCO mutual funds in my account....
Good luck with your planning and investing !
Stoplight...
Thank you Stoplight. I appreciate you taking the time to write as much as you did. It helps me - really ! I never thought about converting to an IRA until now. I will continue to read as much as possible before making a decision regarding my TSP.
As far as estate planning goes, well - I certainly want to be sure my wife will continue to pay the bills. As far as my kids go, they are both adults now in their 30's, but when they were going to college, they both accumulated substantial debt. Perhaps I could have done more to help them, but from what I was reading at the time, it was best to sure up my own retirement for senior years rather than divert all available money toward their education. I paid some, but they both absorbed the Lions share of debt. They don't know I am trying to leave them a little, but it makes me feel good if I could leave them both about 100K. They could pay off any remaining college debt or do whatever with it.
As far as estate planning goes, well - I certainly want to be sure my wife will continue to pay the bills. As far as my kids go, they are both adults now in their 30's, but when they were going to college, they both accumulated substantial debt. Perhaps I could have done more to help them, but from what I was reading at the time, it was best to sure up my own retirement for senior years rather than divert all available money toward their education. I paid some, but they both absorbed the Lions share of debt. They don't know I am trying to leave them a little, but it makes me feel good if I could leave them both about 100K. They could pay off any remaining college debt or do whatever with it.
Welcome, Dave95 !
I see you've entered the murky world of the "how much can I withdraw ?" question...believe me ; it's an art, not a science ! Everybody's situation is different
The short answer to your question is...figure out your yearly rate of return, and use the specified monthly withdrawal amount, adjusted annually. In fact, I have my TSP-73 in front of me right now ! That's the form used for changing your monthly distribution. As you noted, when you hit that RMD age, you'll need a new strategy to preserve your principal, regardless of the tax-deferred investment vehicle.
I assume you've already done all the basics, like estimate your expenses first, and the source(s) of income to meet those expenses (your pension, Wife's pension, Wife's 403(b) (?), Social Security, etc), and you're still a little short....thus, the need to tap your TSP now. In my case, the Wife was also a school Teacher.
My 2 pieces of advice ? First...if your Wife just retired, wait a while and see how your expenses shake out. For instance, I was surprised at how our gasoline use dropped, after neither of us were driving to work ! Also, it's nice not paying a Social Security tax anymore ! OTOH, the amount we're spending on her hobbies skyrocketed :nuts:
Second : Seriously consider rolling your TSP into an IRA, as Birch recommended. You can then have a LOT more flexibility on where your money is invested ; you can be as active or passive as you want ; and the best part...you can withdraw whatever amount you want, whenever you need it (like for 1 of those home maintenance bills !). Of course, you'll pay tax, and you'll still have to deal with an RMD down the road. Many on the Board will argue the pros and cons about that approach, and there are good reasons to go either way, so you have to look at it from your own perspective. Be careful, though, because with some TSP withdrawal decisions, there's no going back !
For me, we don't have Kids, or anyone else we want to make rich when we die, so "estate planning" wasn't a factor.
Anyway...best of luck ! Read through some of the other threads, and ask questions ! LOTS of good discussions about homes, paying off mortgages, life insurance, etc etc, and plenty of people willing to share their knowledge and experience !
Stoplight...
Stoplight
Active member
Welcome, Dave95 !
I see you've entered the murky world of the "how much can I withdraw ?" question...believe me ; it's an art, not a science ! Everybody's situation is different
The short answer to your question is...figure out your yearly rate of return, and use the specified monthly withdrawal amount, adjusted annually. In fact, I have my TSP-73 in front of me right now ! That's the form used for changing your monthly distribution. As you noted, when you hit that RMD age, you'll need a new strategy to preserve your principal, regardless of the tax-deferred investment vehicle.
I assume you've already done all the basics, like estimate your expenses first, and the source(s) of income to meet those expenses (your pension, Wife's pension, Wife's 403(b) (?), Social Security, etc), and you're still a little short....thus, the need to tap your TSP now. In my case, the Wife was also a school Teacher.
My 2 pieces of advice ? First...if your Wife just retired, wait a while and see how your expenses shake out. For instance, I was surprised at how our gasoline use dropped, after neither of us were driving to work ! Also, it's nice not paying a Social Security tax anymore ! OTOH, the amount we're spending on her hobbies skyrocketed :nuts:
Second : Seriously consider rolling your TSP into an IRA, as Birch recommended. You can then have a LOT more flexibility on where your money is invested ; you can be as active or passive as you want ; and the best part...you can withdraw whatever amount you want, whenever you need it (like for 1 of those home maintenance bills !). Of course, you'll pay tax, and you'll still have to deal with an RMD down the road. Many on the Board will argue the pros and cons about that approach, and there are good reasons to go either way, so you have to look at it from your own perspective. Be careful, though, because with some TSP withdrawal decisions, there's no going back !
For me, we don't have Kids, or anyone else we want to make rich when we die, so "estate planning" wasn't a factor. We rolled the Wife's 403(b) into an IRA ; took the one-time "partial withdrawal" and rolled most of my TSP balance into an IRA ; and kept a small balance in my TSP, based on an estimate of what we'll need over the next 3 years, which I'm withdrawing as the "full withdrawal" with a specified monthly amount. That makes sense for us, because I avoid the tax penalty on the distribution because I'm not yet 59 1/2 (like I'd have on the IRA). For you both, that's not an issue, since you're 65...
Anyway...best of luck ! Read through some of the other threads, and ask questions ! LOTS of good discussions about homes, paying off mortgages, life insurance, etc etc, and plenty of people willing to share their knowledge and experience !
Stoplight...
I see you've entered the murky world of the "how much can I withdraw ?" question...believe me ; it's an art, not a science ! Everybody's situation is different
The short answer to your question is...figure out your yearly rate of return, and use the specified monthly withdrawal amount, adjusted annually. In fact, I have my TSP-73 in front of me right now ! That's the form used for changing your monthly distribution. As you noted, when you hit that RMD age, you'll need a new strategy to preserve your principal, regardless of the tax-deferred investment vehicle.
I assume you've already done all the basics, like estimate your expenses first, and the source(s) of income to meet those expenses (your pension, Wife's pension, Wife's 403(b) (?), Social Security, etc), and you're still a little short....thus, the need to tap your TSP now. In my case, the Wife was also a school Teacher.
My 2 pieces of advice ? First...if your Wife just retired, wait a while and see how your expenses shake out. For instance, I was surprised at how our gasoline use dropped, after neither of us were driving to work ! Also, it's nice not paying a Social Security tax anymore ! OTOH, the amount we're spending on her hobbies skyrocketed :nuts:
Second : Seriously consider rolling your TSP into an IRA, as Birch recommended. You can then have a LOT more flexibility on where your money is invested ; you can be as active or passive as you want ; and the best part...you can withdraw whatever amount you want, whenever you need it (like for 1 of those home maintenance bills !). Of course, you'll pay tax, and you'll still have to deal with an RMD down the road. Many on the Board will argue the pros and cons about that approach, and there are good reasons to go either way, so you have to look at it from your own perspective. Be careful, though, because with some TSP withdrawal decisions, there's no going back !
For me, we don't have Kids, or anyone else we want to make rich when we die, so "estate planning" wasn't a factor.
We rolled the Wife's 403(b) into an IRA ; took the one-time "partial withdrawal" and rolled most of my TSP balance into an IRA ; and kept a small balance in my TSP, based on an estimate of what we'll need over the next 3 years, which I'm withdrawing as the "full withdrawal" with a specified monthly amount. That makes sense for us, because I avoid the tax penalty on the distribution because I'm not yet 59 1/2 (like I'd have on the IRA). For you both, that's not an issue, since you're 65...Anyway...best of luck ! Read through some of the other threads, and ask questions ! LOTS of good discussions about homes, paying off mortgages, life insurance, etc etc, and plenty of people willing to share their knowledge and experience !
Stoplight...
Thank you Scout333. The information in the IRS link helps me understand the required minimum distributions better. It appears I will not be able to accomplish what I wanted to...at least the "way" I wanted to.
So, if I begin taking monthly payments now at age 65, say at a modest 4.5 - 5% (while attempting to preserve my TSP balance), When I turn 70 1/2, IRS rules still require minimum distributions (??). It appears these distributions will be based on my life expectancy age, and amount in my TSP balance. So, I will need to take those minimum distributions and set them aside in another savings program to preserve the funds (??) - that is how it all appears to me.
My present balance is 312K. When I retired 8 years ago, I had 135K, and I have been pleased with how my balance has grown, especially since I have not been allowed to make further contributions. My intentions were to take a modest amount out each month, to preserve the balance. I don't know how appropriate it is to be specific here on the forum with $$ amounts, but one of the posters in this thread said it is difficult to offer help without knowing the account balance. It appears to me that I could take about 1,200 out per month (4.5%). Then, when I am 70 1/2 deal with the required minimum distributions IRS requires.
Am I correct in these thoughts? Your collective wisdom is most appreciated
So, if I begin taking monthly payments now at age 65, say at a modest 4.5 - 5% (while attempting to preserve my TSP balance), When I turn 70 1/2, IRS rules still require minimum distributions (??). It appears these distributions will be based on my life expectancy age, and amount in my TSP balance. So, I will need to take those minimum distributions and set them aside in another savings program to preserve the funds (??) - that is how it all appears to me.
My present balance is 312K. When I retired 8 years ago, I had 135K, and I have been pleased with how my balance has grown, especially since I have not been allowed to make further contributions. My intentions were to take a modest amount out each month, to preserve the balance. I don't know how appropriate it is to be specific here on the forum with $$ amounts, but one of the posters in this thread said it is difficult to offer help without knowing the account balance. It appears to me that I could take about 1,200 out per month (4.5%). Then, when I am 70 1/2 deal with the required minimum distributions IRS requires.
Am I correct in these thoughts? Your collective wisdom is most appreciated
Last edited:
Here are a few Q&As from IRS.Gov. Worth reading.
Retirement Plans FAQs regarding Required Minimum Distributions
Retirement Plans FAQs regarding Required Minimum Distributions
Birchtree
Well-known member
The TSP will sell your shares across the board - you have no say or choice, it's IRS regulated. However, in an IRA you will at least have choice and flexibility of choosing which assets or combination of assets to sell to pay the minimum required distribution for taxes. If you have enough dividend income that my cover the RMD and your capital appreciation will continue unchallenged. In an IRA you make your payment choices at the end of year.
So, If I begin monthly payments at age 65, doesn't that satisfy the 70 1/2 minimum distributions rule ? I thought if I started to take money out of the TSP that rule would be satisfied ?
Birchtree
Well-known member
For the long, long term I would consider a roll over from TSP into an IRA primarily to build a permanent income stream. This way even if your principal fluctuates the income stream is constant and likely will grow over time. You will also have the opportunity for capital appreciation - all you have to do is pick a nice dividend growing equity plan. Stocks for the long haul and purrfect for heirs.
RazorCat
Well-known member
Here is the link to a site that I found a few years back.
CSRS FERS Federal Benefits Calculator, Federal Retirement Income Expense Analyzer
I don't know if the software is still free, although they still call it Free Personal Edition. I will provide a complete, extremely accurate estimate, of your retirement benefits and your TSP information. You enter your balance, what you estimate your return will be, how much you want withdraw monthly or annually, and it will provide a bar chart of how long your TSP will last. It even estimates taxes, state and federal, on your entire income, with or without, TSP added.
They don't have a MAC version at present,so I have to set it up to run in a Windows environment on my MAC. Give it a try.
What is your average rate of return each year? If you are earning at least 4-5% per year you can withdraw 4% per year without losing much if any principal. The next issue is adjusting when you reach 70 1/2 ( read publications re required withdrawal amounts). If you have additional resources which will become available later you can withdraw more on the front end and adjust downward as other resources become available.
k0nkuzh0n
Well-known member
no one knows how withholdings will impact your principal without knowing how much principal you have or your return statistics/goals. For all we know, that $500 withdrawal will completely empty your account!
G-fund has made 1.73% this year, so that is really all I could suggest. Basically 0.15% per month (1.8%/yr).
G-fund has made 1.73% this year, so that is really all I could suggest. Basically 0.15% per month (1.8%/yr).
nnuut - Thank you for moving this thread.
burrocrat - Almost heaven. Thank you for the compliment.
Yes, I served 35 years including military service and have been retired for 8 years, but my wife just recently retired from teaching school. Now that our combined income has dropped a bit, I am thinking of tapping in to my TSP.
In preparation for our more senior years, we would like to move from this old 2-story house with considerable maintenance requirements both inside and out. We are both 65. But in order to buy a house with the master bedroom and bathroom on the 1st floor, it is going to cost us more than the value of the house we are in. We would consider either a single detached home, or a 2 story condo as long as the master bed/bath is on the same living space.
So - what I want to do is figure out how much money I can pull from my TSP nest egg without tremendous risk of losing principle. It may be only $500 a month, I don't know. Once I figure that, I can then consider potential equity I stand to net when I sell our present house and will know what price range house/condo to look for. I don't even know if what I want to do is possible.
Thanks for your help.
burrocrat - Almost heaven. Thank you for the compliment.
Yes, I served 35 years including military service and have been retired for 8 years, but my wife just recently retired from teaching school. Now that our combined income has dropped a bit, I am thinking of tapping in to my TSP.
In preparation for our more senior years, we would like to move from this old 2-story house with considerable maintenance requirements both inside and out. We are both 65. But in order to buy a house with the master bedroom and bathroom on the 1st floor, it is going to cost us more than the value of the house we are in. We would consider either a single detached home, or a 2 story condo as long as the master bed/bath is on the same living space.
So - what I want to do is figure out how much money I can pull from my TSP nest egg without tremendous risk of losing principle. It may be only $500 a month, I don't know. Once I figure that, I can then consider potential equity I stand to net when I sell our present house and will know what price range house/condo to look for. I don't even know if what I want to do is possible.
Thanks for your help.
nnuut
Moderator | TSP Legend
I'll see what I can do Dave, welcome to the Forum.
Done, Now open it in the Retirement and IRA thread!
nnuut
Moderator | TSP Legend
Are you aware of this?
Withdrawals After Leaving Federal Service: Your Options
Account Withdrawal Deadline
If you decide to leave your money in the TSP, be aware that you will be required to start withdrawing your money by April 1 of the year following either:
If you do not begin withdrawing your account by the required deadline, your account balance will be forfeited to the TSP. You can reclaim it; however, you will not receive earnings on it from the time it was forfeited.
To understand your withdrawal options, visit Withdrawing Your TSP Account.
https://www.tsp.gov/planparticipation/withdrawals/accountOptions.shtml
Withdrawals After Leaving Federal Service: Your Options
Account Withdrawal Deadline
If you decide to leave your money in the TSP, be aware that you will be required to start withdrawing your money by April 1 of the year following either:
- The year you turn age 70½, if you are separated from Federal employment or the uniformed services, or
- The year you separate from Federal service, if you have already reached age 70½.
If you do not begin withdrawing your account by the required deadline, your account balance will be forfeited to the TSP. You can reclaim it; however, you will not receive earnings on it from the time it was forfeited.
To understand your withdrawal options, visit Withdrawing Your TSP Account.
https://www.tsp.gov/planparticipation/withdrawals/accountOptions.shtml
