Pros and Cons: Monthly, Quarterly, Annual Installments?

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

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jbirdway
Posts: 32
Joined: Fri Jan 27, 2012 2:12 pm

Pros and Cons: Monthly, Quarterly, Annual Installments?

Post by jbirdway »

Hi All,

I’ll be retiring in little over a year, and been wondering about which installment option to make when I’m ready to dip into my TSP. I know a lot has to do with personal situation, but that aside, am wondering about any advantages or disadvantages the available installment options have. Anyone care to share their opinion? Appreciate your time.

Jay

Ericdelee
Posts: 210
Joined: Thu May 30, 2013 7:09 pm

Re: Pros and Cons: Monthly, Quarterly, Annual Installments?

Post by Ericdelee »

that’s a very open ended question for a personal decision. Very tough to be able to commit to an answer for you. Do you have any other information you’d like to share? Is this your only income or do you have a pension? So you have family/mortgage/high tax rate?

Too many variables.

haywoodkb
Posts: 67
Joined: Mon Aug 18, 2014 9:53 am

Re: Pros and Cons: Monthly, Quarterly, Annual Installments?

Post by haywoodkb »

I plan to take monthly payments based on Life Expectancy. That will give me a monthly payment for the rest of my life with a cost of living increase. I can still use the monthly strategies and interfund transfers to manage the money and increase my returns.
Other options don't allow you to manage the funds, or they leave you with static monthly payment that does not account for inflation.

md2018
Posts: 136
Joined: Wed Sep 08, 2010 1:17 pm

Re: Pros and Cons: Monthly, Quarterly, Annual Installments?

Post by md2018 »

I am retiring at the end of the year with 35 years (including unused sick leave). With my SS I will retire at about 60% of my current salary. I have no debt other than household expenses, utilities, taxes, etc. I was planning on taking about 2% of my TSP in monthly installments, which would equal about 15% of my current income. But I currently only need about 60% to meet my current expenses. So the TSP is is just extra income.

Regularguy
Posts: 184
Joined: Tue Sep 24, 2013 11:39 am

Re: Pros and Cons: Monthly, Quarterly, Annual Installments?

Post by Regularguy »

I am considering retiring at the end of this year. I will have 35 years plus a year of accumulated sick leave. I will be 57 years old so I would be using the offset until I reach 62.
My goal was 65% replacement of current income. I will be using about 4 to 5% a year withdrawl from TSP. There was a retirement calculator I received from joining a website called FERSGUIDE which I felt was very useful. I am sure there are many others.

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evilanne
Posts: 1886
Joined: Thu May 14, 2015 6:52 pm

Re: Pros and Cons: Monthly, Quarterly, Annual Installments?

Post by evilanne »

jbirdway wrote:Hi All,

I’ll be retiring in little over a year, and been wondering about which installment option to make when I’m ready to dip into my TSP. I know a lot has to do with personal situation, but that aside, am wondering about any advantages or disadvantages the available installment options have. Anyone care to share their opinion? Appreciate your time.

Jay
I think the monthly option is the most common and simple option, you know how much you will have coming in each month and it is withdrawn the same time each month. If you use life expectancy calculations (letting TSP calculate) it adjusts automatically each year and you don't have to do anything extra when it come time for RMDs.

As far as the annual option, if you don't need the money, it allows you account to grow more if you wait until the end of the year to make your withdrawal. Same arguments of whether to frontload you contributions while working would apply in reverse. It all depends on the market and how you have your money invested. If the market tanks you really don't want to sell your shares at a low point either. If you are going to do annual option, I would suggest you select a month that has low volatility, if that is possible.

Having done the paperwork with TSP, I would suggest anything that does not require having to deal with them any more often than necessary and make sure you have enough taxes withheld.

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12squared
Posts: 372
Joined: Thu Dec 31, 2015 7:28 am

Re: Pros and Cons: Monthly, Quarterly, Annual Installments?

Post by 12squared »

evilanne wrote: It all depends on the market and how you have your money invested. If the market tanks you really don't want to sell your shares at a low point either. If you are going to do annual option, I would suggest you select a month that has low volatility, if that is possible.
Can one fund be selected for the withdrawal (e.g. G fund), or is it split across all funds you hold at the time?

evilanne wrote:I think the monthly option is the most common and simple option, you know how much you will have coming in each month and it is withdrawn the same time each month.
Can you choose the day of the month for withdrawals, as you can the month for an annual withdrawal? If so, you could move everything to G prior to the withdrawal.
“The genius of investing is recognizing the direction of the trend — not catching the highs or the lows.”
- Jack Schannep

"Know when to hold 'em, know when to fold 'em"
- Kenny Rogers

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evilanne
Posts: 1886
Joined: Thu May 14, 2015 6:52 pm

Re: Pros and Cons: Monthly, Quarterly, Annual Installments?

Post by evilanne »

12squared,

It is currently taken proportionally from each of the funds. I wouldn't recommend moving funds around based on the payment date.

Monthly date is based on the day they initially processed full withdrawal, which may take a couple of weeks from the time you send/fax it.

I don't know if you can specify date for annual withdrawal--just that it would have to be prior to December 31st of each year for RMDs.

With outside IRA, quarterly or annual withdrawals might make more sense--to make withdrawals when cash is available without having to sell shares.

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Fund Prices2021-04-16

FundPriceDayYTD
G $16.56 0.00% 0.34%
F $20.66 -0.21% -2.53%
C $62.57 0.36% 11.92%
S $83.28 -0.04% 12.24%
I $38.19 0.63% 7.92%
L2065 $13.71 0.39% 10.49%
L2060 $13.71 0.39% 10.49%
L2055 $13.71 0.39% 10.49%
L2050 $27.99 0.31% 8.45%
L2045 $12.79 0.29% 7.92%
L2040 $46.72 0.27% 7.42%
L2035 $12.36 0.25% 6.82%
L2030 $41.20 0.23% 6.25%
L2025 $11.71 0.18% 4.93%
Linc $22.82 0.08% 2.45%

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