How Long Does It Take To Get My Money From Tsp

Updated 3-30-2022

Perhaps the virtually common question we receive from our regime employee clients is: "What should I do with my TSP when I retire?"

It's a great question, and i we will accost in this blog postal service! The question requires a bit of strategy to ensure yous are taking full reward of the benefits that TSPs (Thrift Savings Plans) take to offer for your specific situation.

While there's non a one-size-fits-all approach, by better understanding the options bachelor to you, you can make a more than strategic, wiser decision. As always, we recommend yous speak with a professional person before taking whatsoever action.

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

Substantially, when you retire yous have four options for your TSP:

1. Brainstorm regular (likely monthly) installment payments

If you separate from government service at age 55 or higher and enter directly into retirement, you may begin taking set withdrawals without incurring an early on withdrawal penalty. Some may actually begin every bit early as l if you are in what's considered a Special Category Employee (SCE) such as police force enforcement officers, firefighters, and border protection officers, to name a few. Otherwise, everyone else needs to await until historic period 59 and ane/2 in order to brainstorm withdrawals without incurring a punishment.

Keep in mind, when you brainstorm making withdrawals, there could be tax implications to be aware of. The amount of taxes you volition demand to pay depends on the type of contributions you made over the years. If you contributed to the TSP with after-revenue enhancement dollars (Roth) and so the distributions should be tax-gratis. If you contributed to the TSP with pre-tax dollars (Traditional) and so you lot will need to pay regular income taxes on these distributions. Nosotros recommend chatting with a tax professional to better understand the tax implications and strategies associated with TSP withdrawals.

2. Purchase an annuity

You can actually have your TSP balance and purchase an annuity that volition pay y'all income for life. This is attractive to some who simply desire the security of a regular payment, and are worried most running out of money in retirement. It is a security blanket.

Keep in mind, this is an insurance policy, and insurance policies offering security and protection, in exchange for a cost. Typically (not always) information technology is the insurance company who ends up benefiting financially from this type of arrangement in substitution for the peace of listen it offers.

three. Leave it in the TSP and let it grow

Depending on when you begin retirement, you tin simply go out the money in the TSP permit it go along to abound. If yous do not need to access it yet, it might exist wise to let information technology be. Similar to other retirement accounts, you will need to begin minimum withdrawals at historic period 72. This is called a Required Minimum Distribution (RMD). The amount of your RMD is a adding based on account size and life expectancy.

If you leave your residuum in the TSP, the investment options are limited to funds offered within of the programme.

four. Make a single withdrawal / transfer the TSP to an IRA

The fourth and terminal choice is the one nosotros about recommend to clients. Y'all can make single withdrawals from the account at whatsoever time if the amount is over $1,000. Many people in retirement elect to withdraw the entire amount and transfer the TSP to an IRA. This is typically the all-time option for folks simply because it gives yous greater command.

Think nearly those kickoff three options again: If yous brainstorm regular withdrawals yous are limited in your investment options. If you determine to annuitize your TSP, you are limited to the ane annuity option offered. If you decide to leave it be and let information technology abound, you lot are limited in investment options and the person managing it is not fully aware of your financial goals.

With this 4th option, if y'all think about it yous can actually practice all of the commencement 3 options, but with more control because an IRA is yours to choose what you'd like to exercise with. If you make up one's mind an annuity is right for y'all, go ahead and purchase an annuity out of an IRA and enjoy the freedom that comes from shopping effectually. If y'all decide to let the funds sit and abound, find an advisor and investment manager who has your unique goals and chance tolerance in mind so yous tin experience growth while avoiding undue hazard.

As you can tell, nosotros are the biggest proponent of option iv (in most cases). Only a give-and-take of caution: be sure to have precautions when transferring a TSP to an IRA. You volition want to consult with a professional to avoid making potentially big tax mistakes. If done correctly, TSPs should be able to transfer to a similar IRA without whatever tax consequences.

Thank yous for taking a few minutes to better empathize your options with TSPs in retirement. Nosotros hope we've started you downward the path of answering the question of what you should practice with your TSP when y'all retire. Feel costless to give united states of america a call if you take further questions. Nosotros are happy to help!

If you would like to learn more than about how what to do with your TSP when y'all retire, we invite you to schedule a complimentary 15-minute phone phone call with i of our fiscal advisors who specializes specifically in retirement planning for government employees!