TSP isn't cheap in retirement?

Managing your TSP and alternate investment options after retirement or separation from service.

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Bubba823
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Joined: Wed Aug 23, 2017 8:16 am

Re: TSP isn't cheap in retirement?

Post by Bubba823 »

Bubba wrote: Sun Apr 18, 2021 12:48 pm So, the bucket plan isn't bad...even if you stole my name.

-real Bubba
Didn't steal anything. Been here years before you showed up.

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evilanne
Posts: 1897
Joined: Thu May 14, 2015 6:52 pm

Re: TSP isn't cheap in retirement?

Post by evilanne »

It would be nice if they would let you specify which fund to withdraw from but I don't see it as a major issue. With the. changes there are many withdrawal options https://www.tsp.gov/living-in-retiremen ... l-options/. If the issue concerns you, switching to quarterly or annually payments reduce the number of withdrawals or "cuts" that can occur and you can adjust your funds based on the. market conditions prior to the withdrawal date(s).

If you have Roth TSP, there should be a way to do a direct transfer/rollover from TSP to a Roth IRA. Requiring RMDs does not make sense.

Scarfinger
Posts: 638
Joined: Mon Jan 30, 2012 12:00 am

Re: TSP isn't cheap in retirement?

Post by Scarfinger »

evilanne wrote: Mon Aug 30, 2021 7:31 am It would be nice if they would let you specify which fund to withdraw from but I don't see it as a major issue. With the. changes there are many withdrawal options https://www.tsp.gov/living-in-retiremen ... l-options/. If the issue concerns you, switching to quarterly or annually payments reduce the number of withdrawals or "cuts" that can occur and you can adjust your funds based on the. market conditions prior to the withdrawal date(s).

If you have Roth TSP, there should be a way to do a direct transfer/rollover from TSP to a Roth IRA. Requiring RMDs does not make sense.
IMO it wouldn't be that big a problem unless the market was down for like a 12 to 18 month stretch. Optimally you would want to sell your bond funds and leave your stock funds alone. Which is why some advocate a transfer to an IRA traditional/Roth IRA

If you have invested in the traditional TSP, your options are limited on transferring to a Roth. You don't want to take a big tax hit with a complete transfers. So you have to do the backdoor style of traditional to Roth conversion in smaller amounts to reduce your taxes incurred.
I am just an average Joe. I have no clue to what the market will do.
TimboSlice wrote: "People really need to stop overthinking this."
7/30/21: Paul Merriman 2 fund strat: (age - 25) x2.5 = TDF + balance into S fund

VAmanBulls
Posts: 231
Joined: Wed Jul 24, 2019 8:37 am

Re: TSP isn't cheap in retirement?

Post by VAmanBulls »

Bubba823 wrote: Fri Apr 02, 2021 3:17 pm Federal retirees can augment their TSP account with an outside IRA and use the bucket system. One bucket for INCOME (TSP G-fund), and the other bucket for GROWTH (IRA).

Now consider this. Let’s say when you retire you have about $900,000 in your Traditional TSP account. You also have an outside Traditional IRA account. You could roll over about $700,000 of that TSP amount into your IRA and still have $200,000 in your TSP account which you would keep in the ultra-safe G-Fund. That $200,000 in your TSP G-fund is now your INCOME bucket. Now you can set up regular monthly withdrawals of about $3,000 from TSP and it will last you for about 5 years. During those same 5 years, you invest the $700,000 in your IRA into something like the *Vanguard Growth Index Fund Admiral Shares (VIGAX). This is your GROWTH bucket. If you use a conservative growth rate of only 7%, that bucket grows to $900,000 in 5 years. The actual growth of VIGAX over the last 5 years is over 19%. You can do the math on that rate if you want.

Great post Bubba823. Just want to clarify a few things. I have both a Vanguard Traditional and a Vanguard Roth account. So when I retire at my goal age of 57, I can roll over $700,000 from my TSP traditional into my Vanguard traditional with no tax penalty, correct? Will TSP try and withhold taxes on that move? Then I can start burning the $200,000 TSP traditional money in the G fund at age 57? And when I'm ready to move funds from my Vanguard traditional back into the TSP traditional G fund around age 62, again with no tax penalty?

Scarfinger
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Joined: Mon Jan 30, 2012 12:00 am

Re: TSP isn't cheap in retirement?

Post by Scarfinger »

I believe the terminology is "transfer" money into or out of the TSP to avoid any possible tax withholdings for traditional to traditional accounts. Otherwise known as a "Direct Rollover".
Request For A Transfer Into The TSP and Form TSP-60
I am just an average Joe. I have no clue to what the market will do.
TimboSlice wrote: "People really need to stop overthinking this."
7/30/21: Paul Merriman 2 fund strat: (age - 25) x2.5 = TDF + balance into S fund

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bloobs
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Re: TSP isn't cheap in retirement?

Post by bloobs »

Am I mistaken in assuming that taking money out of TSP accounts prior to reaching 59.5 yrs old (unless it's a loan or in-service withdrawal) automatically triggers the IRS 10% penalty--regardless of your federal retirement status?

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Aitrus
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Re: TSP isn't cheap in retirement?

Post by Aitrus »

bloobs wrote: Wed Sep 01, 2021 12:03 pm Am I mistaken in assuming that taking money out of TSP accounts prior to reaching 59.5 yrs old (unless it's a loan or in-service withdrawal) automatically triggers the IRS 10% penalty--regardless of your federal retirement status?
Not quite. From my understanding, it depends on what you're doing the withdrawal for. There are other cases aside from a loan or in-service withdrawal that don't trigger the 10%.

If you are retired and receiving a pension paycheck (meaning, you retired at your MRA with enough years to get an immediate pension payment), then the 59.5 yrs old requirement is automatically waived.

If you aren't withdrawing the money but are instead rolling it over into another retirement account, a Vanguard IRA for example, then you're not penalized the 10%. Same goes if you quit the civil service and work in the private sector, and decide to roll your TSP money into your new employer's 401k plan.

Not sure if the 10% penalty applies to members of the military who retire at their 20-year mark and receive a pension payment - which can be as early as 38 for somebody who joined right out of high school.

Also not sure if somebody has a FERS Disability retirement before their MRA. Meaning, they experienced a medical issue that makes them unemployable, so they're on SSA disability as well as FERS disability retirement. If this happened before 59.5 and/or MRA, then I'm not sure if the 10% penalty is applied if they pull money out of TSP.

If I'm wrong on any of the above, somebody please correct me. This is my best understanding based on my reading of the applicable statues / the advice in the FERS Retirement Guide by Dan Jamison. I don't want to be giving away any wooden nickles here.
Seasonal Musings 2021: viewtopic.php?f=14&t=18757
Recommended Reading: http://tspcenter.com/forums/viewtopic.php?f=14&t=13474
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Scarfinger
Posts: 638
Joined: Mon Jan 30, 2012 12:00 am

Re: TSP isn't cheap in retirement?

Post by Scarfinger »

From OPM
If you retire at the MRA with at least 10, but less than 30 years of service, your benefit will be reduced by 5 percent a year for each year you are under 62, unless you have 20 years of service and your benefit starts when you reach age 60 or later.
I think there are different rules for law enforcement.
I am just an average Joe. I have no clue to what the market will do.
TimboSlice wrote: "People really need to stop overthinking this."
7/30/21: Paul Merriman 2 fund strat: (age - 25) x2.5 = TDF + balance into S fund

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Fund Prices2021-09-16

FundPriceDayYTD
G $16.66 0.00% 0.94%
F $21.10 -0.18% -0.47%
C $67.28 -0.15% 20.33%
S $85.17 0.23% 14.78%
I $39.75 -0.26% 12.32%
L2065 $14.47 -0.13% 16.60%
L2060 $14.47 -0.13% 16.60%
L2055 $14.47 -0.13% 16.60%
L2050 $29.33 -0.12% 13.66%
L2045 $13.37 -0.12% 12.86%
L2040 $48.74 -0.11% 12.08%
L2035 $12.86 -0.10% 11.15%
L2030 $42.75 -0.09% 10.24%
L2025 $12.07 -0.07% 8.12%
Linc $23.25 -0.04% 4.36%

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