TSP income after retiring at age 62?

[Want2retire]

OK, there's another thread about retiring at age 55, so I'm starting one about retiring at or after age 62.

I'm planning to retire in 3+ years at age 62. I don't have very many years in, and I'm FERS, and I have been contributing the maximum to my TSP all along, for years. The income from my TSP will be an important part of my retirement income.

Due to longevity in my family and good health up to now, I'm basing my retirement planning on a 40 year retirement lasting until I'm around 102 years old. I'm alone (happily divorced and not planning to ever remarry) and my only heir will have income from elsewhere, so actually I do not need to leave much if anything to her.

What do most people plan to do with their TSP when they retire? I was thinking of maybe leaving it in there, and taking equal payments. I could change the amount from year to year, depending on how the market was doing.

I could also keep about 5-10 years' moderate living expenses in cash and laddered CD's, and live off that when the market was down so that I don't deplete my TSP account too much - - and then replenish the cash during good years when I can withdraw more from my TSP.

Any thoughts? Is this how most people in my situation might use their TSP money? I'm open to suggestions and interested in your ideas and opinions.

 

[SkyPilot]

Your plan seems to be very reasonable, given the factors you describe...

 

[Want2retire]

Good! Thanks for the feedback.

I had been thinking about a life annuity with Met-Life, for part of the money, to help me get through years when the market is down like 2001-2002. However, I have probably discarded that idea in favor of the laddeded CD plan I mentioned.

My reasons for not getting the Met-Life annuity were the same reasons that have been discussed in other threads, here. With a life annuity with Met-Life, you give them the principal and give up any control over it, in exchange for predictable payments. But, I might need that principal at some point, since one never knows what life will bring.

 

[Spaf]

Want2Retire
Good plans so far. I agree, keep control over your TSP. And, those low expenses are hard to beat.
A monthly payment works for me!
Another annuity, na I don't see it. Agree you might need the money, never can tell!
Be sure and save as much annual leave as you can, which the repayment will tide you over till all the retirement funds get set up for disbursement, a good 30 days or more
Plan to visit your social security office about 90 days before retirement. And, make an appointnent in the AM, because there is a bit of paperwork.
Go get em!
Spaf

 

[Want2retire]

Thanks for the feedback, Spaf. As you can tell by my "handle", I am really looking forward to the next phase in my life (retirement).

I could have up to 350 hours of annual leave to cash in, if I carry over 240 hours after my last full year and then don't use any after that, so that will work out well.

I plan to move to another state when I retire, and I'd LOVE to finish my last day of work, and immediately drive out of the state and never look back. Probably that's not practical, though. I don't want to use too much of my annual leave to go up there, scout the neighborhoods, find a house, and close on it during my last year of work. Besides, I want to make sure OPM knows where I am so that they can send me that all-important retiree number. It's probably better to wait until a few months following retirement, to move.

 

[Spaf]

Want2Retire,
I had some of your concerns!
I worked with an agency that kept me in the field alot. For certain events we had to be on site within 24 hours. Oklahoma is a big state. So, I convenced them to let me work out of my home. This was in accordance with what President was pushing and the Department Secretary was pushing.

My last year I worked from my retirement place. Saved the agency travel expenses, and uped their response time. I had all programs except one connected to my computer, which meant, ever two weeks I'd travel to the office.

You can work things out!......But, save that annual leave! My retirement transfer with OPM went very smooth! Get to know your Personnel folks. Ifn it's a lady, send flowers, ifn a guy, a football ticket works. These are the folks you want to be the best of buddies with, at all cost!
Spaf
PS: When you talk to the lady at TSP. Your opening statement is "Why that is the pertiest name I've heard all year"...

 

[tsptalk]

I plan to move to another state when I retire, and I'd LOVE to finish my last day of work, and immediately drive out of the state and never look back. Probably that's not practical, though.

One of the managers where I work retired about a year ago and pretty much went straight from the office to Key West. It was a plan of his forever and he worked it perfectly.

I'm not that organized yet but that impressed me enough to start on my plan. I now have less than 13 years to work on it.

 

[Want2retire]

Sounds like you had a great deal during your last year, Spaf! I could only wish. I've tried to get a situation like what you had set up, but no luck so far.

Also, it's reassuring to hear that your retirement transfer went well with OPM. I'll definitely be sweet to our personnel people and the TSP lady; can't hurt.

 

[Want2retire]

One of the managers where I work retired about a year ago and pretty much went straight from the office to Key West. It was a plan of his forever and he worked it perfectly.

I'm not that organized yet but that impressed me enough to start on my plan. I now have less than 13 years to work on it.

I'd love to do that too, and have been wrestling with a plan to do it. So far, my plan to leave immediately won't work, though!! If I could sell my house here during the last six months of work, rent an apartment after it sells, and buy my retirement house up there during that time, maybe I could do it. I don't see how I could do all of that without using some annual leave, though.

You're right - - it's pretty impressive when someone can actually do that!

 

[ocean]

Good! Thanks for the feedback.

I had been thinking about a life annuity with Met-Life, for part of the money, to help me get through years when the market is down like 2001-2002. However, I have probably discarded that idea in favor of the laddeded CD plan I mentioned.

My reasons for not getting the Met-Life annuity were the same reasons that have been discussed in other threads, here. With a life annuity with Met-Life, you give them the principal and give up any control over it, in exchange for predictable payments. But, I might need that principal at some point, since one never knows what life will bring.

Want2retire,

Good plan and congrats for your long life expectance. 40 years is a long time to enjoy your retirement. For the same reason, you will need to have a well investment plan to grow your retirement fund. Forget about the Met-Life annuity. I can't see people would take this option where so many other better options to choose from.

I would leave the majority of the balance in the TSP account and let it grow. To save the hassle, I would subscribe the TSP newsletter for advice of the TSP allocation so I don't have to bother with the daily market. (Hopefully the newsletter adviser would live longer than you do or you may have to find another one -- just kidding).

Enjoy with your current job for the next 3 years because good or bad, you will not see it again when you retire. What you will miss the most is the co-workers that you’d worked with in your past and mostly likely you will not see them again once you live somewhere else. Hopefully they all come to TSPTalk.

Ocean

 

[Want2retire]

Want2retire,

Good plan and congrats for your long life expectance. 40 years is a long time to enjoy your retirement. For the same reason, you will need to have a well investment plan to grow your retirement fund. Forget about the Met-Life annuity. I can't see people would take this option where so many other better options to choose from.

I would leave the majority of the balance in the TSP account and let it grow. To save the hassle, I would subscribe the TSP newsletter for advice of the TSP allocation so I don't have to bother with the daily market. (Hopefully the newsletter adviser would live longer than you do or you may have to find another one -- just kidding).

Enjoy with your current job for the next 3 years because good or bad, you will not see it again when you retire. What you will miss the most is the co-workers that you’d worked with in your past and mostly likely you will not see them again once you live somewhere else. Hopefully they all come to TSPTalk.

Ocean

Ocean, thanks for your good wishes and suggestions. I don't really know if I'll live for 40 years, but given my family history I need to prepare for that possibility. I don't want to run out of money at 90 if I live to 100.

I have noticed that my TSP money has been growing nicely with just one or two "tweaks" in my allocations each year. Of course, I've been putting in the maximum ($20K this year), but even ignoring that the growth has been good. I do remember what happened in 2001-2002, though, and that is why I plan to have some cash set aside to get through terrible times like that without depleting my TSP.

You're right - - I will probably miss my co-workers once I have retired. Life moves on, though, and it is time for something new. I know I won't miss the alarm clock ringing each morning, and I won't miss battling traffic on the way home from work.

 

[TSATSO]

Hi! I know I'm late to the party on this thread, but thought I'd try to ask a question here, because it seems to fit into this thread nicely. I'm 61 this month, and plan to retire in '08 at age 62. My status is FERS, with a CSRS component (from prior FAA time in the early 80's - don't ask). I am looking at 4 sources of retirement income: Social Security, FERS pension, pension from time with a private company, and (the subject of this question) cash flow from my TSP account. Simply put, I want to draw off the annual gain in value of my TSP account, in the form of fixed monthly payments. For instance, assume the TSP gains 5% in value next year, and it looks like the "interest rate" will be fairly steady for a while. When I retire, I will request a monthly payment from TSP equal to 1/12th of 5% of my balance. Each year I will adjust my monthly payment to match the prevailing rate of return. My intent is to draw off the annual gain in value, while leaving the principal intact. I realize that the number of shares in my account will slowly decrease, but the increase in share price of the remaining shares should keep the value of the account fairly constant. Am I looking at this correctly, or am I missing something? I know the "Required Minimum Distribution" rule at age 70 1/2 may force me to revise my plan, but until then I hope it will work as I've explained it. I would really appreciate any thoughts, comments, or other views on this plan, especially from those who have "already been there". Thanks, and Happy New Year!

 

[Spaf]

TSATSO,
Thats the plan I have in effect! Works great!

In General:
4% is about the maximum annual withdrawl.
TSP has good index funds, low expenses, and protection via the G-fund.

Other consideration:
Have your personnel office give you estimates on your benifits.
Check with your accountant about finances. With medical costs, you may want a minimum home mortgage, to insure you can itemize come tax time.

You may find that you can save money by not having to go to work!

Regards!

 

[TSATSO]

Spaf,
Thanks for the reply. My wife and I have been working diligently for the past 10 years or so to get ready for retirement. I moved most of my personal IRA money into the TSP because of the exact features you mentioned (ie good selection of funds, low expenses, and safety). Our house is paid off, so no mortgage (unless we decide to relocate after we quit working). In fact, we have been totally debt-free for about 5 years! We presently live on about 25% of our combined income - the remainder goes into our retirement funds one way or another. The retirement income from the four sources I mentioned will replace 100% of our current income, so without the drain of having to save, we should be in good shape. I will carry my FEHB health insurance into retirement, so our out-of-pocket medical expenses should be relatively low. I haven't been able to itemize my tax return for many years. Because so much of our income goes into pre-tax (health insurance premiums) or tax-deferred plans (TSP, IRA's, etc) of one sort or another, we end up having very little taxable income. Your suggestion concerning thinking about tax planning is a good one. I welcome any and all suggestions from the old hands on this forum. Thanks again for taking the time to reply.

 

[Want2retire]

My intent is to draw off the annual gain in value, while leaving the principal intact. I realize that the number of shares in my account will slowly decrease, but the increase in share price of the remaining shares should keep the value of the account fairly constant. Am I looking at this correctly, or am I missing something?

Inflation could eventually eat away at the value of your account. You probably should find out how much inflation has occurred during the year, and allow for it.

For example, if inflation is 3%, in 25 years your money will have less than half of the buying power it has today. But, if you allow the amount in your TSP to increase by the rate of inflation each year, I think that should take care of that potential problem.

 

[clester]

TSATSO,
One thing to think about is inflation. While your balance will stay the same inflation will erode its buying power. Might want to build in a cola for yourself.

 

[Spaf]

What I've always heard is that you don't want to withdraw over 4%.
This doesn't include an inflation factor of 3%.
Your total is now 7%.
The G-fund will give you almost 5%.
If you follow the leaders and only go 50% (lowering your risk).
You are bound to pick up 2%+.
Your primary goal is to protect your nest-egg that you have saved over the years. In younger years you should estimate how big of an egg will be needed and plan your savings accordingly.
TSPTalk should lead you to managing your funds with minimum risk, and the ability to hide in the G-fund, should the bears come out to play!
MHO!