TSP between retirement and 59 1/2?

[gucindy]

Be advised that once you start payments from the TSP, you no longer have the option to take the one-time partial withdrawal. By starting payments, you are beginning a full withdrawal and thus no longer have the option of the one-time partial withdrawal.

The TSP.gov site does not make this info clear - although it's logical when you understand that payments is part of a full withdrawal.

https://www.tsp.gov/planparticipation/w ... ount.shtml

[rf53]

My understanding is that if you are eligible for retirement at the age of 55, you are not penalized for withdrawing money from your TSP. There are a number of options for withdrawing your TSP.

In response to the first part of your statement, if you are eligible to retire and you retire on, or after any day of the year that you turn 55, these are the withdrawal and other options for the TSP:

1. Leave it alone and keep it invested until 59 1/2 or beyond. You do not have to take any payments from the TSP until you turn 70 1/2. Note, if you do not chose to in some way access your TSP immediately upon retirement, you lose access to it until 59 1/2 unless you take the 10% penalty.

2. Roll it over into another tax deferred retirement account.

3. Purchase an annuity... (don't!)

4. Take a full lump sum payment, or a portion of the balance in lump sum.

5. Set up equal monthly distributions until the money is depleted in a monthly amount you select. The minimum monthly withdrawal amount is $25 per month. You may change this monthly amount once each year before Dec. 15 by filing a form TSP-73.

Did I leave any options out?

I believe that the best way to handle things for most people who retire on, or after the first day of the year they turn 55, but well before they turn 59 1/2, is to set up monthly equal distributions. In that way they can keep control of the balance of their TSP, they can keep it invested, and they can change the monthly distribution amount each year to adjust for their income needs. If they do not need the monthly income, they can simply set up the minimum payment ($25/mo.) and in that way they can ensure that if things change they can gain access to the money in a larger monthly amount the following calendar rather than being forced to decide between taking the 10% penalty, or waiting to turn 59 1/2.

Thanks for the information. I am torn between 2 possibilities. One is to leave it in the TSP and set up a monthly income stream, and adjust it once a year. I like the low fees charged by TSP, but dislike the small amount of options for the money.

The other is to roll it into a Vanguard traditional IRA. I like their low fees also, and they give me way more options for investing the money. I also want the ability to not touch it if I don't want to. I have enough to last a few years in a taxable account, but I want the ability to access it if I need to.

I was told that if I transferred it to a traditional IRA I would have to wait the minimum 5 years from the date of transfer to access the cash. That I didn't want to do. I don't believe I have to wait because it was set up to have people retire at a MRA that was less than 59 1/2.

Interesting. I would not want to wait another five years to have access to my money. Five years is a long time! As for the TSP, the retirement counselor who provides seminars for my agency is convinced that the low cost of the TSP makes it the best vehicle around. One thing he pointed out is that since much of Congress is now invested in the TSP, they will be more likely to jealously guard the TSP and its backers in bad times. That makes much sense and may be the single best reason to stay with this plan. When you look at how the banking landscape has changed since 2008, it is enough to keep you up at nights unless you have a safe deposit box full or Krugerrands somewhere!

While I plan to leave my money in the TSP and set up monthly distributions, my gripe is not so much the limitations on places to invest the money. My gripe is the two per month IFT rule. While this rule prevents participants who think they know what they are doing from engaging in ill-advised market timing, it also penalizes the more astute participants from making moves as they see fit. I guess nothing is perfect, and the rule only prevents aggressiveness since you can always come back to the G after two IFT's and wait for a new month.