Can I Leave My Money In Tsp After Retirement

Perhaps the most common wonder we receive from our government employee clients is: "What should I do with my TSP when I retire?"

It's a great inquiry, and one we will address in that blog Emily Price Post! The interrogate requires a bit of strategy to ensure you are fetching full advantage of the benefits that TSPs (Thrift Savings Plans) have to go for your specific situation.

While there's non a one-size-fits-totally approach shot, by better understanding the options available to you, you canful form a Thomas More strategic, wiser decisiveness. As e'er, we urge you speak with a professional before taking whatsoever carry out.

"What should I do with my TSP when I retire?"

Essentially, when you retire you have 4 options for your TSP:

1. Begin regular (likely every month) installment payments

If you separate from government service at age 55 or higher and enter forthwith into retirement, you may begin taking set withdrawals without incurring an early withdrawal penalty. Some may actually lead off arsenic early American Samoa 50 if you are in what's considered a Special Category Employee (SCE) such as law enforcement officers, firefighters and border protective cover officers, to name a few. Differently, everyone else needs to wait until age 59 and 1/2 in order to begin withdrawals without incurring a penalty.

Keep in listen, when you commenc devising withdrawals, there could be taxation implications to be evocative of. The amount of taxes you wish need to pay depends on the type of contributions you ready-made over the years. If you contributed to the TSP with after-tax dollars (Roth) past the distributions should be task complimentary. If you contributed to the TSP with pre-tax dollars (Traditional) then you will need to pay regular income taxes on these distributions. We recommend chatting with a tax professional to better understand the assess implications and strategies joint with TSP withdrawals.

2. Purchase an annuity

You can actually take your TSP balance and purchase an annuity which will pay you income for life. This is attractive to some who simply want the security measures of a regular defrayal, and are worried about running out of money in retirement. Information technology is a security system blanket.

Keep in heed, this is an policy policy, and insurance policies offer security and protection, in exchange for a cost. Typically (not forever) IT is the insurance underwriter who ends up benefiting financially from this type of arrangement in exchange for the peace of mind information technology offers.

3. Leave it in the TSP and let it grow

Depending on when you begin retirement, you can plainly pull up stakes the money in the TSP let information technology continue to grow. If you dress non need to access it yet, it power personify all-knowing to let it be. Similar to other retreat accounts, you will demand to begin minimum withdrawals at age 72. This is called a Required Minimum Statistical distribution (RMD). The total of your RMD is a calculation based on account size and life expectancy.

If you leave it in, the investment options are limited to funds elected by TSP money managers.

4. Make a lone back away / transfer the TSP to an Anger

The fourth and inalterable option is the one we most advocate to clients. You can make single withdrawals from the account at any time if the amount is over $1,000. More people in retreat elect to withdrawal the entire amount and transfer the TSP to an Wrath. This is typically the best choice for folks plainly because it gives you greater hold in.

Suppose about those first three options again: If you begin normal withdrawals you are limited in your investment options. If you resolve to annuitize your TSP, you are limited to the one annuity option offered. If you decide to leave IT be and let it grow, you are limited in investment options and the person managing it is not in full aware of your business enterprise goals.

With this 4th option, if you think almost IT you can really do all of the first 3 options, just with more control because an IRA is yours to choose what you'd like to do with. If you decide an annuity is right for you, plow ahead and buy in an annuity out of an IRA and enjoy the exemption that comes from shopping about. If you decide to let the finances seat and grow, find oneself an adviser and investment manager who has your unique goals and risk tolerance in mind then you buns experience growth while avoiding undue run a risk.

As you can tell, we are the biggest proponent of option 4 (in most cases). But a word of caution: equal sure to train precautions when transferring a TSP to an annuity. You will want to confer with with a professional to avoid fashioning potentially puffy tax mistakes. If done correctly, TSPs should be able to transfer to a similar IRA without any taxation consequences.

Thank you for taking a a few minutes to break understand your options with TSPs in retirement. We Leslie Townes Hope we've started you down the path of answering the question of what you should do your TSP when you retire. Feel free to give the States a call if you have boost questions. We are happy to help!

If you would suchlike to see more near how what to do with your TSP when you retire, we invite you to schedule a complementary 15 minute telephone set call with one of our financial advisors who specializes specifically in retreat planning for government employees!