What to do with TSP after retirement?

[Chulke]

So...I'm new to this thread and with that I feel I need to introduce myself and give some background info.


My name is Chuck and I retired from active duty Air Force after 19 LONG years of service. While I was in I started investing with the TSP and did ok...did not put/get nearly what I wanted into it before I retired but I still have a nice little chunk of change in there.

I recently got on with the VA and now I am getting matched on my contributions and starting to see that add up. (AND I LIKE IT ALOT!!!) It makes a huge difference!

I currently follow a seasonal investment strategy with my TSP and I will soon combine my Uniform services TSP into my VA TSP to make the management of it easier.


My question is about actual full out retirement (age 65 retirement) and what do most people choose to do with their TSP monies? Do you keep it in there and buy an annuity? Roll it over into an IRA/401K?

What do people do with it?

Thanks,
Chuck

 

[tsptalk]

Hi Chuck -

I moved this to its own thread since the other was more about what people physically do after retirement. This is a new and good question.

I'm not retired so I haven't chosen an annuity option, etc., but when I resigned I did rollover a lot of my balance into an IRA to get more investment options (kept some in the TSP). That's not everyone's concern, but I like to trade ETF's and I get more bang for the buck with them - although you pay more bucks to do the trading.

Let's see what others who have retired have done...

 

[Maricar19]

Retired almost 3 months ago. I am thinking of doing a 50% roll over of my TSP to Vanguard traditional IRA, still debating.
I can have some sort of penalty free distributions with TSP right now, but the problem is it is intermingled with my Roth TSP, which is not penalty free since I am under 59.5 yo.
So I am delaying any sort of monthly distributions in order to avoid the Roth penalty.
The reason I am doing a 50% roll over is the withdrawal options afforded by Vanguard when I reach 59.5.
After 59.5, I also plan to convert whatever I rolled over into a traditional IRA to a Roth IRA.

I am not combining my military TSP (not much) with my federal TSP since most of it is some sort of tax free (not the earnings).
I will withdraw all of it (military) when I reach 59.5.

The other 50% that will stay in TSP-I am hoping to grow it back to a 100% with my premium subscriptions here at TSPTALK.

 

[Chulke]

Oh I see...Sorry about that!

 

[Chulke]

Yeah...the reason I ask is because I have heard so many conflicting options and I know I got to do what's right for me and all...I just kinda want to guage what the majority of folks do with all their money.

I'm hoping to be a TSP millionaire upon full retirement. And then maybe buy an RV and travel the country while keeping my home that's paid off...But I still have a WAY long way to go...but hey, I guy can dream can't he. I'm about to be 39 and if I work till I'm 68ish...that'll be 30 years of service and 30 years of TSP gains hopefully!


Just hoping my seasonal strategy pays off as advertised from past years!!

 

[uscfanhawaii]

This is a related thread that was recent: http://www.tsptalk.com/mb/retirement-and-ira-talk/25578-transferring-tsp-roth-ira.html

 

[evilanne]

My question is about actual full out retirement (age 65 retirement) and what do most people choose to do with their TSP monies? Do you keep it in there and buy an annuity? Roll it over into an IRA/401K?

What do people do with it?

All of the above. I plan to start taking life expectancy withdrawals, probably starting next year, which is my only option since I took early retirement prior to my minimum retirement age (MRA). At MRA, there is a little more flexibility on withdrawal options. Make sure you understand your different options under FERS & TSP.

Interest rates are too low currently to make an annuity through TSP a decent option. Based on my calculations you can do better over the long run if you get an average rate of return in TSP of 4-5% and potentially much more with higher returns. With the annuity you are locked in to whatever selection you make at that time but every situation is different.

A few years ago I opened an outside Roth, which I would recommend in addition to TSP. The problem with having both Roth & Traditional TSP in same account is that everything is paid out proportionally, which complicates things when it comes to withdrawal. If you decide to roll over TSP to IRA(s) at retirement, leave something in TSP account as you can always transfer funds back in from an IRA (might be a good idea get Roth out and put traditional back). I have several IRAs outside but I plan to keep my TSP separate as I like the low cost simple structure of the TSP funds.

 

[2moryrs]

I have been retired 8 years! (CSRS) I left my funds in the TSP. I like the simplicity and I won't need to touch any of it until 70 1/2! I feel very blessed to be in that position. My TSP account has actually gained a bit with no further additions from me. I am thinking about rolling over an IRA from my credit union to either the TSP or Vanguard. I inherited an IRA from my DAD and am taking withdrawals from that as required by law.
I have Vanguard accounts which I turned over to be managed for me and that is going well. I also have some Vanguard accounts not under management.
Leaving funds in the TSP means you can roll over other regular IRA funds in along the way. Once you take all your funds out of the TSP you are done. No more low cost investing, even with the small amount of choices they offer. Still the best game in town in my humble opinion.
And that's my take on this subject!

 

[DrDetroit]

Retired almost 3 months ago. I am thinking of doing a 50% roll over of my TSP to Vanguard traditional IRA, still debating.
I can have some sort of penalty free distributions with TSP right now, but the problem is it is intermingled with my Roth TSP, which is not penalty free since I am under 59.5 yo.
So I am delaying any sort of monthly distributions in order to avoid the Roth penalty.
The reason I am doing a 50% roll over is the withdrawal options afforded by Vanguard when I reach 59.5.
After 59.5, I also plan to convert whatever I rolled over into a traditional IRA to a Roth IRA.

I am not combining my military TSP (not much) with my federal TSP since most of it is some sort of tax free (not the earnings).
I will withdraw all of it (military) when I reach 59.5.

The other 50% that will stay in TSP-I am hoping to grow it back to a 100% with my premium subscriptions here at TSPTALK.

I for one would like to hear what you decide to do. I'm assuming you aren't combining your military and civilian accounts because you received tax-free (combat zone) contributions. But I think that you are good either way. If you combine them or if you leave them separate, you only pay taxes on the earnings (interest) of that money but not on the principal. https://www.tsp.gov/PDF/formspubs/tsp-775.pdf

If you are a member of the uniformed services serving in a combat zone, your TSP contributions are made from your tax-exempt pay. Those tax-exempt contributions are deposited into the balance(s) you chose when you made your TSP contribution election. TSP contributions from tax-exempt pay are always exempt from federal income tax when withdrawn. The earnings on tax-exempt traditional (non-Roth) contributions are taxable upon withdrawal.

The earnings on Roth contributions made from tax-exempt pay are not taxable provided they are qualified. Your entire TSP account is subject to the required minimum distributions. When you have traditional (non-Roth) and Roth balances in your account, any withdrawals will be paid pro rata (i.e., proportionally) from each balance. Also be aware that if you receive a payment from an account that has both taxable and tax-exempt contributions,

your distribution will be paid proportionally from taxableand nontaxable amounts.

On the Roth contribution/account balance problem, what you can do is roll all the TSP Roth contributions into a Roth IRA so you can divide that money up accordingly. Once you have the Roth money out then you no longer need to worry about the penalty or doing the withdrawal math. I have spoken to recent retirees who regretted contributing anything to the Roth but the out isn't that difficult.

I do like the idea of rolling over a portion of the traditional funds to an IRA. Because the TSP has such stringent withdrawal options, I would think rolling over at least of a year's worth of distributions is a clever decision. If you are planning to take 4% of your total TSP (example) in 2016, roll that into a traditional IRA and get an account with a bank card and all that. Seems prudent to hold a good deal of your balance in the TSP because of the low fees, but actually getting the money from the TSP is a huge drawback to the program. They said they are going to address this, but that doesn't help you and many other recently retired folks.

 

[2moryrs]

This is an old thread, but I thought I would post this anyway.
A year ago the TSP made some withdrawal changes. I just watched a webinar that NARFE (National Active & Retired Federal Employees) put out. It was very good, related to the changes.
I have no hope of becoming a TSP Millionaire, but in my personal finances, after following Dave Ramsey's program I might make it!