TSP and 72T one more time

[Templefan]

Hello everyone,

First I wanted to thank everyone for all the information shared on the board.

i am an LEO who is looking to retire in January 2014 with 26 years. I am looking to take 72t withdraws from my TSP. I know you can take life expectancy withdrawals but I was wondering if anyone has taken amortization withdraws, since they seem to be a little more generous and if so was it easy to set up. Any info would be appreciated.

Thanks everyone

 

[clester]

Hello everyone,

First I wanted to thank everyone for all the information shared on the board.

i am an LEO who is looking to retire in January 2014 with 26 years. I am looking to take 72t withdraws from my TSP. I know you can take life expectancy withdrawals but I was wondering if anyone has taken amortization withdraws, since they seem to be a little more generous and if so was it easy to set up. Any info would be appreciated.

Thanks everyone

I am taking withdrawals based on amoritization method. It not too difficult to do. But you should know that these payments are fixed until you reach 59.5 . With interest rates so low you might want to look at using the tsp calculated min withdrawal method. It is a little easier and the way it's calculated you should get a little raise each year. Look at a table of values up to 59.5 and compare. Go to 72t on the Net | SEPP, 72t, and /72q Distributions and check out their calculators.

 

[Templefan]

Thanks Clester, I think that's the way I am leaning. It would be a few dollars less but then it actually is more after 2 years. Plus like you said, less has 7 months and counting. Out of curiosity, how long did it take to get your first tsp check?

thanks again

 

[clester]

Thanks Clester, I think that's the way I am leaning. It would be a few dollars less but then it actually is more after 2 years. Plus like you said, less has 7 months and counting. Out of curiosity, how long did it take to get your first tsp check?

thanks again

Tsp was very quick. I think about a week or two. Pension is the problem. Temp pension without supplement suck. It tookn6 months for that to get resolved. Got may AL and SL on time though.

 

[Kaufmanrider]

Thanks Clester, I think that's the way I am leaning. It would be a few dollars less but then it actually is more after 2 years. Plus like you said, less has 7 months and counting. Out of curiosity, how long did it take to get your first tsp check?

thanks again

Sounds like you are retiring when I am, Jan 11, 2014 with 25 years 7 months plus 5.5 years military Personally, I am leaning to roll my money into an IRA just so I can do more with it and maybe take the 72T amortization. Of course I don't see a rush on taking the 72T, I might just wait a bit and watch interest rates.

 

[Templefan]

Hi Kaufmander,

Yes indeed, that's the plan. I am leaning on keeping my money in TSP because of the low fees and probably taking life expectancy withdraws. After the first 2 or 3 years you actually get more then the other methods, but like you said it will depend on rates. For me it will be 25 years and 9 months, almost identical to you. 7 months and counting.

 

[Kaufmanrider]

Hi Kaufmander,

Yes indeed, that's the plan. I am leaning on keeping my money in TSP because of the low fees and probably taking life expectancy withdraws. After the first 2 or 3 years you actually get more then the other methods, but like you said it will depend on rates. For me it will be 25 years and 9 months, almost identical to you. 7 months and counting.

I am thinking of maybe doing the annual re-calculation with the 72T method. I think rates are about as low as they can go and will more than likely rise over the years, that plus getting older will shorten my life expectancy and hopefully with my account balance will keep growing. I'll have larger 72t payments each year. I believe that's the same process TSP uses to do annual recalculations. If your account balance drops, your monthly payments go down. Gotta keep making money to get paid.

TSP is low, but there are other investing options with low costs. I have to weigh the TSP limitations with the additional investing options outside TSP are an advantage, plus more moves. I want to be able to really diversify my money.

Congrats on your retirement. I'll be submitting my paperwork next month.

 

[Templefan]

OK, a couple of questions for the retirement experts. The 72T interest rates are creeping up, the maximum rate for September and October is now 1.95% up from 1.47%.
1. Do you think the life expectancy payout for TSP will adjust up?
2. If I elect to go with a 72T amortization payout can I just ask for that amount in monthly payments from TSP or do I have to transfer to an IRA?

Thanks in advance for you replies

 

[Kaufmanrider]

OK, a couple of questions for the retirement experts. The 72T interest rates are creeping up, the maximum rate for September and October is now 1.95% up from 1.47%.
1. Do you think the life expectancy payout for TSP will adjust up?
2. If I elect to go with a 72T amortization payout can I just ask for that amount in monthly payments from TSP or do I have to transfer to an IRA?

Thanks in advance for you replies

1. Yes, I believe TSP uses the monthly Treasury rate you see 72T.net refer to.
2. If you do a life expectancy withdrawal you get the amount monthly TSP calculates using you account balance, age, and the current interest rate.
If you want a set dollar amount, you can tell TSP what you want each month, but if you have not obtained the age where the 10% penalty no longer applies you will be hit.

 

[clester]

OK, a couple of questions for the retirement experts. The 72T interest rates are creeping up, the maximum rate for September and October is now 1.95% up from 1.47%.
1. Do you think the life expectancy payout for TSP will adjust up?
2. If I elect to go with a 72T amortization payout can I just ask for that amount in monthly payments from TSP or do I have to transfer to an IRA?

Thanks in advance for you replies

You can do a 72t from tsp by requesting monthly payments of the amount you calculate. I use 72t on the Net | SEPP, 72t, and /72q Distributions for calculators. Keep a copy of those calculations for your records. You will not be subject to penalties but there is a IRS form to about using life expectancy withdrawals. Form 4250 or something. Turbo tax makes it easy. I would make sure there is enough difference between min dist method and amoritization method. If they are close and you can stand it I would chose the min dist because you will get yearly raises and TSP will do it all for you. My rate was 3.45 so it was better for me to do amoritization. If you use amoritization method you can't change your monthly amount until age 59.5

 

[Templefan]

Thanks Clester, I knew you would have the answer. As you said it will depend on the interest rate. I am looking at January 11th, so I will be monitoring the rates. I hope you are enjoying your retirement. I will be there soon.

 

[Kaufmanrider]

You can do a 72t from tsp by requesting monthly payments of the amount you calculate. I use 72t on the Net | SEPP, 72t, and /72q Distributions for calculators. Keep a copy of those calculations for your records. You will not be subject to penalties but there is a IRS form to about using life expectancy withdrawals. Form 4250 or something. Turbo tax makes it easy. I would make sure there is enough difference between min dist method and amoritization method. If they are close and you can stand it I would chose the min dist because you will get yearly raises and TSP will do it all for you. My rate was 3.45 so it was better for me to do amoritization. If you use amoritization method you can't change your monthly amount until age 59.5

So, Templefan, did you start the process? I have been holding off until I get my final retirement numbers from OPM to decide which method I'll use. With a Min Dist (TSP Life Expectancy) I'd only get an increase each year if my account balance increases. The stability of an Amortization might be better for budget planning, but I'd decrease my account balance faster then Min Dist unless I get stellar returns.

If I start out with Amortization I can do a one time change to Min Dist (allowed by IRS). Not sure if TSP would allow you to do it, but I can with my Roll-Over IRA.

Doing a 72T calculation a Min Dist with an 8% annual gain would not equal or exceed an Amortization for 6 years. If interest rates go up, the Min Dist would never catch the Amortization.

 

[ExFed]

Thanks to everyone and for your previous input and for creating this great forum. I am a newby to this 72t rule and I have one additional question before I pull the trigger. First I'm single, 53 and retired from Law Enforcement with no dependents. I have $541,000 in my TSP currently sitting in the S fund. I had a good contract gig just after I retired in 2010 but it was one of those "Shovel Ready Projects" that had a finite lifespan. The company I worked for was not able to find follow on work as they promised and I found myself missing about six figures and back down to just the pension. I'm scraping by and worrying myself sick. So I'm thinking about hitting the TSP for some breathing room. I like the TSP because of the low management fees and I can relatively safely follow this heard of much more intelligent people who are nice enough to publish their thoughts.

1. Is the only option for pulling out surtax free money from the TSP the 72t with SEPP payments? I don't see an option to pull your payments all at once, yearly rather than monthly.

2. I see if you take the life expectancy option the TSP automatically withholds 20% as if you were married with three dependents. I went to a 72t calculator to get an idea of how much more I should withhold to make sure I don't have to pull my wallet out for Uncle Sugar at the end of the year. I come up with around $200 to $250/month depending on which bracket I fall into (25-28%). Does this sound reasonable or am I missing something?
3. What interest rate will TSP use for calculations?

Thanks again for any help you can lend.

 

[ExFed]

Never mind. I figured it out myself.