TSP Withdrawal Rules

[jurate1]

Hello all, I am new to the forum. I will be retiring at 62 in apx 1.5 years. I am a little confused on the withdrawal rules for TSP after retirement. I understand that I can take 1 lump sum. I plan to take apx 100,000 out the year after I retire. Assuming I will be in a lower tax bracket then. The plan is to leave the remainder to grow until I reach 70. Then at 70 start making yearly withdrawals. We would use hubbies SS and IRA until then. My understanding is I can only take one lump withdrawal? Is that correct? What if some emergency expense comes up? The only option is to start yearly withdrawals or transfer all to an IRA?? Then I would have to pay taxes on that which I don't want to do. What have others done? Thanks for any advice and Happy New Years! Gina:smile:

 

[guppie]

Re: TSP Withdrawal rules

There is recent legislation that will change the 2 with drawl rule. (1 Partial and 1 full) According to the calls I made it will take about 18 months to take effect, so You should have additional options just about the time you retire

Hello all, I am new to the forum. I will be retiring at 62 in apx 1.5 years. I am a little confused on the withdrawal rules for TSP after retirement. I understand that I can take 1 lump sum. I plan to take apx 100,000 out the year after I retire. Assuming I will be in a lower tax bracket then. The plan is to leave the remainder to grow until I reach 70. Then at 70 start making yearly withdrawals. We would use hubbies SS and IRA until then. My understanding is I can only take one lump withdrawal? Is that correct? What if some emergency expense comes up? The only option is to start yearly withdrawals or transfer all to an IRA?? Then I would have to pay taxes on that which I don't want to do. What have others done? Thanks for any advice and Happy New Years! Gina:smile:

 

[evilanne]

Re: TSP Withdrawal rules

I took a partial withdrawal and rolled it over to an IRA and plan to start full withdrawal based life expectancy in January. Rules are more restrictive for me since I retired prior to 55. I plan to reduce my payments to the minimum amount of $25/month once I reach age 59.5 With your partial withdrawal, you can always roll over an additional amount to an IRA if you think you may need more in the case on an emergency (easier to get additional funds from IRA than TSP if needed) or you can begin full withdrawal and designate the monthly amount. Whatever amount(s) paid directly to you from tax deferred TSP are taxed as ordinary income. Until they change the withdrawal rules, if you plan on doing both a partial and full withdraw, just make sure you do the partial before you apply for a full withdrawal. Once you start a full withdrawal, you can't take a partial withdrawal...so if you needed more money your only choice would be wait until the next annual change or closing TSP (a direct transfer to IRA would be best option if you decide to leave TSP). I'm hoping this will change when they implement the TSP Modernization Act.

P.S. You may want to talk to an financial advisor, accountant or tax advisor based on your tax situation $100K + pension(s) + SS or other income before making any withdrawals. It usually takes 30 days for agency to notify TSP that you are separated.

 

[jurate1]

Re: TSP Withdrawal rules

Thank you!

 

[James48843]

TSP Withdrawal rules

New rules will be published soon- today you are limited in withdrawal options. After new rules are published, you will have more options. If you don’t need it now- wait until the new rules come out to see what your options will be.


From the TSP wen site:

TSP Withdrawal Options Bill Becomes Law — (November 20, 2017) On November 17, 2017, President Trump signed into law the TSP Modernization Act of 2017, which will provide TSP participants with more flexible withdrawal options. The law eliminates the statutory prohibition on multiple post-separation withdrawals and multiple age-based withdrawals while a participant is still working. It also removes the restriction that participants cannot take partial post-separation withdrawals if they’ve already taken an age-based in-service withdrawal. Though it has no effect on required minimum distributions mandated by the Internal Revenue Code, the law also allows separated participants who are over age 70½ to remain in the TSP, eliminating the requirement to make a withdrawal election on an entire account balance. Participants will also be able to stop monthly payments, change payment frequency, or elect to purchase an annuity while receiving monthly payments.
The Executive Director of the FRTIB has the authority to establish parameters regarding this new ability to take multiple withdrawals, and the law gives the FRTIB up to two years to make the regulatory and operational changes necessary to enact these changes.

Happy new year!




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[tom1tom1]

Re: TSP Withdrawal rules

So James, have you heard anything about the estimated time period for the new rules to go into effect? Sure hopes it's not 2 years!

 

[uscfanhawaii]

Re: TSP Withdrawal rules

If you roll over to an outside IRA, you will NOT have to pay taxes on it. Only dispersements get taxed, not roll overs,

 

[James48843]

Re: TSP Withdrawal rules

So James, have you heard anything about the estimated time period for the new rules to go into effect? Sure hopes it's not 2 years!

In answer to your question- NO, I have no information about the estimated time period for new rules.

Right now the TSP Thrift Board is very busy rolling out the new military blended retirement system- in which all new recruits are put into the TSP with matching funds, and existing service members have the option now to opt in. It's kind of like the CSRS to FERS transition of the 1980's- its a REALLY BIG DEAL, and the TSP Thrift Board wants to make sure it goes smoothly.

All the focus has been on that rollout 0f the military blended retirement- AND on the request for a 20% increase in TSP budget, to $309 million dollars for operational funds. This is a huge increaase compared to just a few years ago. A decade ago they were running at like $89 million, if I remember correctly.

Here is a link to the Thrift Board's website. https://www.frtib.gov/

There, you will find links to the monthly Thrift Board's meeting minutes. The last one they have posted up now is minutes from the September meeting, which is before the law was past. I would venture to say that we won't be seeing discussion of that change until at least the first board meeting after the law was signed- meaning the December or January meeting miunutes- which won't be published until about March or so.

In the past, for these types of changes- it has been typically a year or two for them to write the rules, reprogram the software changes needed to execute the change, and then test before release. I would not count on the change being in place for at least a year, but again, that' only my opinion. They could decide to prioritize that change and roll it out sooner. I have no idea.

Lots of good reading in those thrift board meeting minutes: go read!

https://www.frtib.gov/

Take care! Good luck!

 

[RazorCat]

Re: TSP Withdrawal rules

So James, have you heard anything about the estimated time period for the new rules to go into effect? Sure hopes it's not 2 years!

They have 2 years to get it done.
Best case scenario: 1 year, 364 days from new law being signed until new policies are published and new forms are made available to TSP participants.
Most probable scenario based on past FRTIB rollouts of new policies:: 1 year, 364 days, and then the FRTIB submits a request for an extension.
Not being a pessimist. Just a realist. :laugh:

 

[Scraps]

You can do a direct trustee to trustee transfer of your TSP to an IRA and avoid the tax issues until you withdraw money from the IRA. You will not be forced to withdraw any of the money until age 70 1/2. You will be able to withdraw any amount you want at any time and have a broader range of investment vehicles.

If you do a rollover, where the funds are sent to you first, there will be tax consequences immediately. The term "rollover" is misused as many people use "rollover" to describe a "direct trustee to trustee transfer" when they are in fact two different beasts. Any good brokerage will be able to help with the direct trustee to trustee transfer.

 

[RazorCat]

Upon retirement, take a partial one time withdrawal.
Using form TSP-77, page, section II designate the total amount you want to withdraw.
On page 7, section X (Traditional IRA) or page 8, section XI (Roth IRA) designate the amount you want transferred directly to an IRA and provide the other information required for the transfer. Notarize and submit the From to TSP. They’ll handle the rest.
Mine took 3 weeks from mailing it in until I received a direct deposit for my part, and the remainder was rolled over to an IRA.
https://www.tsp.gov/PDF/formspubs/tsp-77.pdf

When the provisions of the TSP Moderization Act are completed by the FRTIB you’ll be able to complete additional withdrawals.