Best way to manage TSP in retirement

[Gunny]

For those of you with TSP accounts in your retirement portfolio, how do you manage your TSP account in retirement. I am looking for the best way; transfer to an IRA on retirement, fixed monthly disbursements, or monthly disbursements based on TSP life estimator. I also plan to actively invest within TSP while in retirement to preserve capital. Thoughts? Thanks!

[David1961]

Not sure if you have retired yet, but when you do, the TSP will send you a booklet explaining all of your options. If you do want to transfer it to an IRA account, you must do it within a certain number of days (either 30 or 60, I think).

[RE2Boys]

via the Internet!

Not sure what info your looking for, but my TSP is 90% in "G" Fund as it is unique and not available elsewhere. It compose a significant portion of my bond allocation as it never goes down but the return follows, I believe, 10 year Treasuries. I have Traditional and Roth IRAs invested in stocks to balance my retirement portfolio.

I left government employment 13 years ago and just left the money in TSP as no need to tap it yet. Plan to wait and take the minimum required distribution when turn 70.5 though I may roll it into a T-IRA for simplification purposes and reduce the number of accounts to track.

BTW, spent 22 very enjoyable years living in Huntsville, AL if that is where your located.

[samclem]

gunny,
Like many folks, my TSP account is just one portion of my portfolio, so I use make the most of it's best features that I can't get elsewhere (the "G" Fund and low costs). Our other money is spread among after-tax accounts, traditional IRAs, Roth IRAs, and a solo 401K plan.
Have you got most/ll of your savings in the TSP?

[nash031]

Not retired, but TSP is my largest single account for now. I wouldn't transfer to an IRA simply because I can get what I want out of TSP between the five funds, the G fund is unique and fantastic, and the expense ratio of all of those funds is probably the lowest there is. It's a great benefit, and I wouldn't want to lose those advantages just to be able to invest in more stuff with that money. That said, I have other money in other accounts, so not sure what your situation is.

I'm planning on shifting my TSP allocation more toward G as retirement approaches as RE2boys stated.

[Dreamer]

I left my funds in the TSP when I retired in 2006. I have not used any yet. I did have them in a Lifecycle Fund, but switched earlier this year to C,G,I and S Funds. Did not keep any in the bond, F, fund. I will probably wait until 70 1/2 and take monthly distributions needed to satisfy the age 70 1/2 requirements.

[Gunny]

Thanks for the replies. Here is a little more information. TSP represents the largest portion of my non-pension retirement assets. I do have stock heavy (70-30) Roth IRAs for both me and my wife. I plan to retire at 56 in six years and want to take a minimal monthly disbursement from my TSP, maybe 4%, adjusting annually to match inflation, while investing it to grow more than inflation. I want to die with money in my TSP to continue to support my wife. Anyone doing this? I am unclear if TSP allows me this type of flexibility in retirement. I also plan to let my Roth IRAs grow. Use it as a long term care insurance plan, or if not need for that, life insurance on me to pass along to my wife.

[Greg V]

My retirement portfolio is roughly half in TSP and half in IRAs. While TSP does not have as many variations for withdrawing funds as IRAs, it has adequate investment and distribution options and unbeatably low expense ratios.

I take a monthly amount from TSP to provide a baseline of income and have the IRAs available to withdraw funds at irregular intervals based on our needs and overall investment performance.

If your wife is the beneficiary listed with TSP (or your IRAs for that matter), she would receive any monies in those accounts when you die. I would also assume with "gunny" in your user name that you would consider the Survivor Benefit Program in your planning for your wife's financial security upon your death. You can find plenty of thoughts on SBP and alternate methods of providing this support on this site and other sites such as Bogleheads.org.

My view would be to keep TSP as part of your overall portfolio and use a total portfolio asset allocation and withdrawal strategy vice managing TSP and our IRAs in a separate, piecemeal, fashion.

[donheff]

Like a couple of others my TSP is a small portion of our total portfolio and I have it 100% in G. I would definitely not do that if it was a large part of my portfolio. I moved an old IRA into the TSP since I believe it is one of the best sets of index funds on the planet. Government can do some things well.

[W2R]

Quote:

Originally Posted by donheff Like a couple of others my TSP is a small portion of our total portfolio and I have it 100% in G. I would definitely not do that if it was a large part of my portfolio.

+1 Me too. My TSP is 100% in G Fund.

Also, I am withdrawing equal monthly payments from the TSP that are small enough to be sustainable (until I am in my mid 90's, should I live that long). This is like a second pension for me, rock solid income since the G Fund share prices cannot fall.

Since my monthly FERS deposits are frankly very tiny, this extra from the TSP is more, and is a big help in retirement.

In five years I turn 70+1/2, and will have to take MRD distributions. My equal monthly payments will be enough to cover the MRD requirements, though.

[retiredunder50]

Quote:

Originally Posted by David1961 Not sure if you have retired yet, but when you do, the TSP will send you a booklet explaining all of your options. If you do want to transfer it to an IRA account, you must do it within a certain number of days (either 30 or 60, I think).

https://www.tsp.gov/PDF/formspubs/tspbk02.pdf is the booklet describing options to withdraw TSP funds. There is no mention of having to transfer funds to an IRA within 30 or 60 days.

[martyb]

My TSP will be our biggest non-pension money source after I retire in a couple of months. I'm going to try not to tap it for a couple of years, until wife retires and we decide to either pay off the house or not. Either way, I'll keep it invested so it will continue to grow. If we do pay off the mortgage, I'll invest the balance of the TSP less agressively, but still more than G fund only. I'll be even more aggressive if we decide to keep the mortgage. Either way, pensions will fund retirement life. It would be more "fluffy" without the mortgage.

[retiredunder50]

"I want to die with money in my TSP to continue to support my wife."

that is a good plan BUT if she were to pass away, the money in a TSP account that goes to children (or other beneficiary) would be taxable IMMEDIATELY. Currently, the best plan is for the surviving spouse to transfer the TSP to an IRA to allow for a more favorable tax circumstance for the survivor's beneficiaries.

[donheff]

Quote:

Originally Posted by retiredunder50 "I want to die with money in my TSP to continue to support my wife." that is a good plan BUT if she were to pass away, the money in a TSP account that goes to children (or other beneficiary) would be taxable IMMEDIATELY. Currently, the best plan is for the surviving spouse to transfer the TSP to an IRA to allow for a more favorable tax circumstance for the survivor's beneficiaries.

Not true if you are talking about the spouse (which appears to be the question). For the kids, yes, roll over and treat like any inherited 401K. As for the spouse here are some paragraphs from the TSP booklet:

Spouse Beneficiary.
If a spouse is determined to
be a beneficiary of part or all of a civilian or uni-
formed services account, the TSP will establish
a beneficiary participant account in the spouse’s
name if the spouse’s inherited share is
$200 ormore
. The entire balance of the beneficiary partici-
pant account will be invested in the Government
Securities Investment (G) Fund until the spouse
makes a different investment choice or chooses to
withdraw the money. The money in a beneficiary
participant account is not subject to Federal in-
come tax withholding until it is withdrawn.


AND

A spouse beneficiary whose inherited share
is $200 or more will automatically avoid
the mandatory withholding and defer tax
liability by keeping the funds in the estab-
lished beneficiary participant account, or
by having the TSP transfer all or part of
the eligible funds directly to an individual
retirement account (IRA) or an eligible
employer plan (including the spouse’s own
pre-existing TSP account).

[retiredunder50]

I thought I was clear about that - "good plan". I was only adding additional info for what happens after the surviving spouse dies and didn't move the money out to an external account. This is one serious difference between TSP versus IRAs/401Ks that negatively impacts the remaining assets and needs to be considered when planning distributions/withdrawals.

[smurray5991]

I am 58 and also grappling with what to do with my TSP funds, especially since they are virtually all non-Roth. With SS @70 and pension I will be in 25% bracket when I hit MRD age, so don't want to be forced to withdraw (I definitely won't "need" those funds to live).
So despite the advantages of very low expense ratios and some unique fund options (e.g., G), conversion to tIRA and then to Roth IRA seems to be the way to go for me. What I'm struggling with now is "how much" and "how fast" to convert because with TSP you have limited options on how you can get funds out. Since I don't have much 'space' to reach the 15% tax threshold and would never get it all converted at that rate, so will need to do larger conversions at least in some years. I-ORP says get it all converted in the first few years.... but I still don't know how fast.
The point is that if it makes sense for you to Roth convert, it may be better to do a partial or total rollover into IRA. Or take the annual distributions in the amount you want to convert. [Note that whether you're paying taxes on the conversion from after-tax accounts or from the IRA funds makes a difference in the calculus -- there are some other recent threads discussing this).
For me, I'm currently thinking about doing a one-time lump sum into an IRA (like 50% of the total?), to give me some flexibility on large conversions in these first few years of semi-retirement when my income is less predictable, and then taking variable distributions from then on (with the latter you can adjusting the monthly withdrawal amount once each year, which I'll do to optimize my tax hit). Note that TSP allows you to combine the withdrawal options, but you can only do one 'lump sum' rollover ever (although as another poster mentioned, there is no 'deadline' to decide to do this as far as I could see).

[FYI, these non-Roth TSP assets represents about 35% of my total portfolio.]

[samclem]

Quote:

Originally Posted by smurray5991 Note that TSP allows you to combine the withdrawal options, but you can only do one 'lump sum' rollover ever (although as another poster mentioned, there is no 'deadline' to decide to do this as far as I could see).

One small point to add: I think it's a bad idea to ever close one's TSP account. As long as you have an account you can roll funds into it from an IRA, 401K, etc, but once it closed you can never get back in unless you are a current federal employee. It's hard to know what the future may bring, what our needs might be, or what new products might be offered within the TSP in coming years/decades, so keeping the options open costs nothing and is worthwhile.
By the same rationale, I always advise retiring/separating military folks to open a TSP account even if it's just $1000 that they put in. It keeps future options open.

[zinger1457]

Quote:

Originally Posted by smurray5991 Note that TSP allows you to combine the withdrawal options, but you can only do one 'lump sum' rollover ever (although as another poster mentioned, there is no 'deadline' to decide to do this as far as I could see).

The weak part of TSP has always been the withdrawal options and lack of flexibility to make changes and take out additional money as needed. Just to clarify you can only do one partial withdrawal but you can always do a full withdrawal at any time (except for any amounts used to purchase an annuity).

[donheff]

Quote:

Originally Posted by retiredunder50 I thought I was clear about that - "good plan". I was only adding additional info for what happens after the surviving spouse dies and didn't move the money out to an external account. This is one serious difference between TSP versus IRAs/401Ks that negatively impacts the remaining assets and needs to be considered when planning distributions/withdrawals.

Sorry, I misread your post. But assuming DW and I died together or I died and DW kept the funds in a TSP (which would now become hers) it sounds like it would still pass to the kids like any IRA or 401K. If they want to avoid tax on any of these they need to roll over into an inherited IRA. Here is the section from the pamphlet:

A non-spouse beneficiary
can avoid this withholding and defer the tax liability by
requesting that the TSP transfer all or part
of the payment directly to an “inherited”
IRA.

[retiredunder50]

Quote:

Originally Posted by donheff Sorry, I misread your post. But assuming DW and I died together or I died and DW kept the funds in a TSP (which would now become hers) it sounds like it would still pass to the kids like any IRA or 401K. If they want to avoid tax on any of these they need to roll over into an inherited IRA. Here is the section from the pamphlet: A non-spouse beneficiary can avoid this withholding and defer the tax liability by requesting that the TSP transfer all or part of the payment directly to an “inherited” IRA.

sadly, rules for establishing an inherited IRA do not apply when inheriting a spousal beneficiary participant account from the TSP

you can learn about this at Beneficiary Beware - Retirement Planning - Pay & Benefits - GovExec.com

In a nutshell, under TSP regulations, transfers from a beneficiary participant account to an inherited IRA are not tax-deferred. This means the surviving children owe an immediate monster tax bill on their inheritance. Some ideas have been recently floated to ease this burden by stretching out the payment over an extra year or so, but that hasn't become the law yet.