TSP advice upon retirement

[dave123]

I'm forced to retire in June of 2020. I'm trying to decide what to do with my TSP. My pension and savings/secondary employment will probably allow me to live without messing with the money, though I'm not completely sure.

Option 1 - Roll it over into a 401k and let someone manage the money for me. I spoke to a guy from the Ric delman firm and they do it for 1%.

Option 2 - Put it in a Roth. But then, wouldn't I get a massive tax hit?

Option 3 - Let it sit in TSP. Mostly G fund. But I've heard that you can only make 2 transactions (as in withdrawals) EVER???

Option 4 - Cash it and buy a home to rent out. This option was from a friend, and is actually pretty scary - the tax hit alone makes it seem crazy.

Opinions? Other options?

Thanx for any advice!

Dave

 

[Maricar19]

Option 1 - You probably meant IRA
Option 2 - Yes- massive tax hit, but if you don't need it for the next 10 years, maybe it might be worth it
Option 3- There will be some changes regarding TSP withdrawals around September
Option 4- No opinion

Suggestion - Leave it with TSP, there is L income that has been earning more than the G Fund or move it to an IRA, but make sure you watch for maintenance fees.

I know some TSP Talkers have better ideas.

I'm forced to retire in June of 2020. I'm trying to decide what to do with my TSP. My pension and savings/secondary employment will probably allow me to live without messing with the money, though I'm not completely sure.

Option 1 - Roll it over into a 401k and let someone manage the money for me. I spoke to a guy from the Ric delman firm and they do it for 1%.

Option 2 - Put it in a Roth. But then, wouldn't I get a massive tax hit?

Option 3 - Let it sit in TSP. Mostly G fund. But I've heard that you can only make 2 transactions (as in withdrawals) EVER???

Option 4 - Cash it and buy a home to rent out. This option was from a friend, and is actually pretty scary - the tax hit alone makes it seem crazy.

Opinions? Other options?

Thanx for any advice!

Dave

 

[uscfanhawaii]

Option 1 - You probably meant IRA
Option 2 - Yes- massive tax hit, but if you don't need it for the next 10 years, maybe it might be worth it
Option 3- There will be some changes regarding TSP withdrawals around September
Option 4- No opinion

Suggestion - Leave it with TSP, there is L income that has been earning more than the G Fund or move it to an IRA, but make sure you watch for maintenance fees.

I know some TSP Talkers have better ideas.

option 3 - yes, current rules only allow 2 withdrawals (2nd one is ‘the rest’.). But you can take 1 now, and the rules change on Sept 15. See TSP update: https://www.tsp.gov/whatsnew/Content/index.html#withdrawaloptions
New rules do not state any maximums. But keep in mind, if you take ALL out, you can’t ever put back. If you leave some in, you can always put back.

Other comments:
Why have ANY balance in G? This so-called ‘risk free’ fund has one major risk...the risk of losing out to inflation. As Maricar says, L funds are a way better choice than G.

 

[tsptalk]

Why have ANY balance in G? This so-called ‘risk free’ fund has one major risk...the risk of losing out to inflation. As Maricar says, L funds are a way better choice than G.

I'm too lazy to calculate the L-Income fund's return had it been around since 1987 like the G-fund, and used the same allocation, but check out the average return for the G-fund since 1987. What a different investment world it would be today if we were seeing 1980's like G-fund returns if near 9%. 0% interest rates for 10 years made the stock market a must for most people. Of course inflation was crazy then as well.

Current L-Income allocation...

 

[James48843]

I would add that the G fund of 2019 is NOT the G fund of the 1988 timeframe. THEN the rate was based in part on the 30 year t bill. Now it no longer is.

My advice - ( which is not advice)- ask yourself this- when will you start using the money?

And then move it to the time appropriate L fund, and park it.


Sent from my iPhone using TSP Talk Forums

 

[uscfanhawaii]

Yes, thanks for the fund update!
And you can see that even the L Income still has WAY too much in G!

 

[dave123]

Thank you for the replies. I'm suprized nobody seems to think that letting Ric Edelman firm handle it for 1% is a good idea??

Thanx for the correction, Maricar, yes, I meant IRA.

I will look into the changes in Sept, thanks, I did not know about that variable.

 

[Intrepid_Timer]

Gotta love a company that lowers your expectations before they even handle your money. :laugh:

https://www.edelmanfinancialengines...cles/dispelling-the-myth-of-10percent-returns

Why would you pay someone 1% of your account (win or lose) to just put it in a fund and forget about it, except for "periodic" re-allocations. They same thing can be dome with the L funds on your own if that is what you are looking to do. Now if you are worth millions, perhaps you can be put on a "buddy list" and get special treatment, I don't know.

 

[Intrepid_Timer]

Some reviews from Yelp. I was curious because I thought Ric Edelman worked for ESPN. :laugh: Non I realize I've seen him on CNBC.

"I was with Edelman for a couple of years, when I elected to move to cash over some concerns I had. It was a dumb thing to do and I lost the opportunity to see some appreciable gains. Eventually, I moved back into a position where I was again holding their securities. At the time, I was patiently counseled by Frances Martin-Falanga. After this painful lesson I received a call from her manager, Doug Keegan, who rang under the auspices of getting feedback on Ms. Falanga. I spoke glowingly of her and then, Mr. Keegan let me have it. He threatened not to let me continue investing with Edelman if I ever again moved to a cash position. Now, while I'm not Rockefeller, my investment was not 5 dollars either. I could not believe that someone in an advisory position would dare to threaten me this way. Well, I ultimately moved all of my investments, making sure that any new advisors knew that I would not accept being thwarted if/when I elected to move to cash. Be forewarned, if you're thinking of moving to Edelman, I would do your due diligence to make sure the advisor you select is in no way connected with Doug Keegan. Apparently, he thinks investors are stupid and should be treated like morons."

"If you want a financial advisor whose idea of communication is an email once or twice a year asking if anything has changed, and a free copy of Ric's latest CD or book (!) at holiday time, this company is for you. If you want someone who is more interested in increasing YOUR net worth than theirs, look elsewhere. We invested some of our assets with EFS for quite a few years and were not impressed with either the service or the (very conservative) return. We have all of our assets with another firm now and are enjoying higher returns with lower fees along with much better communication in the form of quarterly meetings and clear reports."

"I would not recommend this company to invest with. The first person from this company who contacted me for a "free retirement review" was unprofessional. I asked to have another advisor meet with me. I spent an hour explaining who I was & the money I had. I sent my investments after the review to be evaluated. I was told that I would need "2 million dollars" to retire! When I told this investor that was not possible his response was, "earn more or spend less." My advice stay far away! They are not interested in who you are & helping you. They are interested in helping folks with tons of money. They did not say this but that is the reality!"

 

[dave123]

Thanx for all the good advice. Although I'm sure you can find negative reviews (and positive) for Ric and probably every other thing in existence, I'm listening. Although my 2 hour free review was a positive experience, I believe that Intrepid Timer makes a great point in that they would probably just put it somewhere conservative and do very little work throughout the year for that 1%. The advice to pick an L fund, coupled with the new rules that will allow multiple withdrawals sounds like excellent advice.

Question, I was under the impression that you can never put money into TSP after retirement; the post from uscfanhawaii seems to imply otherwise? Can I put money back that I've taken out? If so, could you point me to a link that explains this process?

thanx again.

 

[ravensfan]

It is true that once you leave Federal Service you can no longer contribute to your TSP account. However if you have a traditional or roth IRA or other qualifying plan through something other than your federal job, you can transfer that into your TSP account after leaving service. After leaving the Federal Government, I went to work part time driving a school bus. The company I work for offers a simple investment plan run by MetLife with a 3% employer match. That investment is eligible to be transferred to my TSP if I choose to do so.

Here is a link from TSP that should help you: https://www.tsp.gov/PlanParticipation/EligibilityAndContributions/RolloversTransfers/index.html

 

[uscfanhawaii]

It is true that once you leave Federal Service you can no longer contribute to your TSP account. However if you have a traditional or roth IRA or other qualifying plan through something other than your federal job, you can transfer that into your TSP account after leaving service. After leaving the Federal Government, I went to work part time driving a school bus. The company I work for offers a simple investment plan run by MetLife with a 3% employer match. That investment is eligible to be transferred to my TSP if I choose to do so.

Here is a link from TSP that should help you: https://www.tsp.gov/PlanParticipation/EligibilityAndContributions/RolloversTransfers/index.html

Thanks for the detailed answer, RF!
And just to reiterate, as it says in the TSP.gov reference, you can only transfer into a TSP account if it is already open. That’s why I said if you take everything out of TSP (and close it out), you can never put it back.

 

[road_kill]

The main problem/issue with option #1 is the fee. A 1% fee is high especially compared to what they are going to do with your money which is basically park it somewhere (some type of index). In my opinion it's best to leave it in TSP because I can almost guarantee you that you will not find a financial institution that will beat the fees/expenses of TSP.

I'm going to compare the last 14 years of the L-Income fund to Ric Edelman's 1% fee.

EXAMPLE: Say you had a starting balance of $500,000 in the L-Income. After 14 years you would have paid $8,679 in fees. If your money would have been with Ric Edelman you would have paid $87,529 in total fees. This is a big difference.

What most of us fail to realize is this fee (1%) is a percentage of your account value annually. One percent of $500,000 is $5,000 for the first year.

In this example I used an average return of 3.84% because that is the average of the L-Income fund since inception. The average annual fee for the L-Income fund is 0.093%. The first year fee for the L-Income fund would have been $465.

 

[tsptalk]

.... And it wouldn't make much sense to pay a 1% fee if all you're looking to make is 3.8%.