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Thrift Savings Plan (TSP)
Old 09-28-2017, 01:14 PM   #1
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Thrift Savings Plan (TSP)

I searched the archives, but couldn't find a thread dedicated to this topic, just a few individual posts. If you're not a retired federal employee or military retiree, this probably won't be of much interest to you .

Against lots of advice, I kept my TSP after I retired from the government. I'm currently at a 70/30 split - G Fund (government bonds) and the rest split among international, small cap and their version of a S&P 500 fund. Nothing in the bond fund. Prior to retirement a while ago, I was 10/90 and maxed my non matched contribution. Wanted to keep this as an untouched reserve.

Many folks say to roll it into an IRA as soon as you can, others say hold on for dear life. I held on and its done well for me. I am now at the point where I see no solution other than to roll it to my Vanguard rollover IRA account. The reason is that I turn 70 1/2 in June of 2018. For non TSP folks, this probably evokes a lot of ? - what difference does that make?

The TSP is not like a normal 401K or IRA. The government makes it hard to do anything except put in money or make interfund transfers. I can transfer IRA money to my credit union with the click of a button or write a check. To withdraw or transfer money with the TSP, you have to submit notarized forms in hard copy and the process takes several weeks. That's an issue, but not the real problem. The TSP only allows one partial withdrawal and one final total withdrawal (or rollover) - period - forever. No other options. You can take out equal monthly withdrawals (adjustable once a year), but this seems to me like a PITA option that I don't want to deal with . Recently congress allowed the TSP Board of Trustees, if they want, to offer multiple withdrawals, but it could take years to be implemented. They move slowly and deliberately. I suppose that's to protect us from blowing it all on flashy new cars . I don't expect any action on this in the near future .

Faced with the probability that I can only make one partial withdrawal in 2018 and a final full withdrawal in 2019, I've decided to roll it all to VG this year. The process is ponderous. First you have to get their form notarized, then mail it to VG (or wherever you have an IRA account) and have them certify that you actually have an account with them, have it mailed back to you and then mail it to TSP HQ. Then TSP mails a physical check to VG (no wire or e transfer allowed) - can't do anything electronically. You can fax the forms, but that's not something I'm willing to do. Faxing is very 1980s and things I've tried to fax recently never reach their destination (nothing financial).

I have everything ready to go to VG and start the process. It will probably take about 30 to 40 days total. I figure I have about 20 days from now to get my package in the mail and still get this done by December 31 .

I don't feel bad about closing out my TSP account, but I would have liked to hold it for a few more years. Investment options are limited, and if I pass, it's treated like a 401K, which makes it harder to handle for my wife (as opposed to an IRA).

Has anyone done this recently? Any advice? Thanks in advance for any comments.
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Old 09-28-2017, 01:23 PM   #2
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I am thinking of doing the same thing...and watching the responses. I agree with you that the Govt makes it hard to manage withdrawals and do the normal things that you can do with VG. I have all my other accounts with VG.
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Old 09-28-2017, 01:26 PM   #3
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My only advice would be to keep at least a small amount in your TSP. That way you can roll money back into your account in the future when more liberal withdrawals are allowed (pending the new law). Once you close out your TSP account you are out for good and cannot take advantage of the extremely low fees or the unique G fund.
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Old 09-28-2017, 01:27 PM   #4
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To me, the automatic monthly payments option through the TSP that you adjust once a year (if desired) seems a whole lot simpler than transferring the money elsewhere, reinvesting it, then personally selling securities as necessary/desired to fund withdrawals (at presumably some interval greater than 0).. but that's just me.

As for actually doing it, I have no experience with rolling over to an IRA so I'm sorry but I don't have anything to offer there.
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Old 09-28-2017, 01:38 PM   #5
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Another thing to keep an eye on is the very recent 20% budget increase approval for the TSP and how it will impact us. Will it still be the lowest cost??

Thrift Savings Plan gets 20 percent budget boost - Government Matters
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Old 09-28-2017, 02:03 PM   #6
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Quote:
Originally Posted by Ragna View Post
My only advice would be to keep at least a small amount in your TSP. That way you can roll money back into your account in the future when more liberal withdrawals are allowed (pending the new law). Once you close out your TSP account you are out for good and cannot take advantage of the extremely low fees or the unique G fund.
I'm not sure how that would be beneficial. I'd still have to take a separate RMD from the TSP each year, no matter how small. And currently you can't do that more than once. The TSP is treated like a 401K, which means you have to take out an RMD each year from each one individually.
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Old 09-28-2017, 02:06 PM   #7
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Quote:
Originally Posted by exnavynuke View Post
To me, the automatic monthly payments option through the TSP that you adjust once a year (if desired) seems a whole lot simpler than transferring the money elsewhere, reinvesting it, then personally selling securities as necessary/desired to fund withdrawals (at presumably some interval greater than 0).. but that's just me.

As for actually doing it, I have no experience with rolling over to an IRA so I'm sorry but I don't have anything to offer there.
See my response to ragna. Not sure what the point would be. Yes, it would satisfy the RMD requirement, but you can't adjust your monthly amount for a year. I have many years of experience managing my accounts and have no problem selling or trading securities or mutual funds when I need them. It's really easy through VG.
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Old 09-28-2017, 02:22 PM   #8
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Quote:
Originally Posted by powerplay View Post
Another thing to keep an eye on is the very recent 20% budget increase approval for the TSP and how it will impact us. Will it still be the lowest cost??

Thrift Savings Plan gets 20 percent budget boost - Government Matters
Thanks, powerplay. I missed that news. Doesn't sound like it will have a real impact on fees. Some of VGs funds and ETFs cone very close to those of the TSP. I found it interesting that the discussion focused on IT upgrades for the military blended retirement. No mention of more withdrawal flexibility.
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Different outlook, different viewpoint on uses for the TSP
Old 09-28-2017, 02:56 PM   #9
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Different outlook, different viewpoint on uses for the TSP

I contributed the max every year to my TSP while I worked for the federal government.

I haven't been thinking of rolling over, because my FERS pension/annuity is rather small. I regard the TSP as a sort of non-COLA second pension. I put it all into the G Fund, and I arranged equal monthly withdrawals that I plan to continue throughout retirement. The monthly TSP deposit is a little bigger than my FERS deposit each month.

Right now it will last at this rate until I am 94 years old, and I doubt I will live much longer than that but I could start withdrawing a little less each month after age 85 if I am still around.

So, because of the way I use the TSP, I have no interest or desire in rolling it over. But I can sure understand why you might want to do that.

I like the fact that I have TSP monthly income I can depend on, recession or not, in addition to my FERS pension and SS.
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Old 09-28-2017, 03:45 PM   #10
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I'm not a former fed - but MIL was - and DH is her guardian - so he has dealings with TSP/OPM/Etc...

She set it up so that it was distributed monthly in equal payments. This satisfies her RMD... That seems the easiest way to handle it.
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Old 09-28-2017, 04:08 PM   #11
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Two options that are tough to replicate outside of TSP are the G fund and Lifecycle Income so I plan to retain DW in the TSP for these no matter what.
"Everybody" recommends moving from an employer plan to an IRA but usually can't tell you why and assume all employer plans are unattractive. Some plans have good options like stable value funds.
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Old 09-28-2017, 04:59 PM   #12
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I agree the current TSP withdrawal options suck but would be surprised if it takes more than 1-2 years before the proposed changes get approved and implemented. I've only completed a partial withdrawal from my TSP and it didn't very long for the check to get sent out, as I recall less than a week after I submitted the paper work. If I was in your situation I would probably do as Ragna suggest and at a minimum keep a small amount in the TSP just to keep it open until the changes are implemented and I had a chance to evaluate them. Not sure why setting up RMD's with the TSP would be a PITA, my understand is that the TSP does the RMD calculations for you based on your balance and transfers a monthly payment into your checking/savings account.
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Old 09-28-2017, 05:49 PM   #13
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About 25% of my current retirement assets are in TSP. Most of that is G, some C, some S. I plan to let it ride for a long while, but at 40, I've got a long while. Hoping for more options for withdrawals, but I suspect if none come along in the next 15-20 years, I will also roll the account over to simplify the "buckets" from which I'm withdrawing.

The downside is losing the free lunch that is the G fund, but I hope to make that a non-factor, and hopefully the TSP will become far less of my overall retirement assets over time, especially as my military service comes to an end. We'll see - I could be a Fed!
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Old 09-28-2017, 06:33 PM   #14
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I still have a few years to go, but if and when the new rules are changed and subsequently are put in place the only reason to keep money in the TSP is for the G fund. I say this since comparing to cost of similar index funds and etfs at fidelity, vanguard, schwab, etc the minimal difference in expense does not merit or deserve the headache one has to endure in dealing with TSP antiquated administrative processes.
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Old 09-28-2017, 09:10 PM   #15
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Originally Posted by zinger1457 View Post
I agree the current TSP withdrawal options suck but would be surprised if it takes more than 1-2 years before the proposed changes get approved and implemented.
Not sure why setting up RMD's with the TSP would be a PITA, my understand is that the TSP does the RMD calculations for you based on your balance and transfers a monthly payment into your checking/savings account.
I agree with Zinger. I've kept my $$ in the TSP since I retired 7 years ago, and see no reason to move it elsewhere as I get older. The expenses are low, there is nothing like the G fund, and I don't find it that cumbersome to change my monthly withdrawal amount if I want to (yeah, the notarized form is a bit of a pain, but not really that big of a deal). Sure, you can only make a change once annually, but I have no reason to want to change it more frequently than that anyway. I will probably bump up the monthly amount I am withdrawing as I get closer to age 70, so that the required RMD is not too large.
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Old 09-28-2017, 11:16 PM   #16
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Thanks for all the responses. Leaving the TSP is a very individual decision and I understand the reasons for staying. I retired from the government at 55, so i've stuck with the TSP for over 14 years. I've always had a mix of the available funds and performed annual rebalancing, though I never tried the retirement date ones. My plan always was to roll out of the TSP when RMDs became mandatory, though I began to have qualms as the deadline got closer.

I'm kind of surprised so many people who responded consider the biggest asset of the TSP to be the G fund. It has historically performed better than any other similar interest bearing account, however, the yield over the last few years has been been lower than 2%. I'd consider the low cost other funds to be a lot better value than the G fund. Once you are within 5 years of retirement or fully retired I can understand the fear of losing part of your nest egg, but, for most of us, this is only a part of our retirement income. Our pensions are virtually risk free, so the TSP is a place to take some risks. But, again, each to his or her own investment process.

Thanks again.
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Old 09-29-2017, 05:06 AM   #17
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I'm 5 years out from this 'problem'. I've been retired going on 3 years and I have not used my TSP and cannot see a need. my monthly income covers all my wants a needs at this point. I've never considered the G fund a great benefit at all. All of my money is in a livecycle fund, L 20 or whatever.
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Old 09-29-2017, 05:30 AM   #18
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I kept my TSP when I retired at the end of 2011 and decided to start monthly payments in 2014. I realized that I'd made a mistake, but due to the limited choices allowed my only option was to roll the whole thing into an IRA, which I did within days.

For both actions, I did have to get the forms notarized, but was able to fax them and the TSP took care of them very quickly.
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Old 09-29-2017, 07:34 AM   #19
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I rolled an old IRA over into the TSP after I retired. Since I don't need access to large withdrawals I plan to keep it intact throughout retirement. I will set it to monthly or annual RMD withdrawals when I turn 70.5. DW has much larger tax deferred acounts than I do and we have a sizable joint after tax equity account. Unlike most I use keep 100% of the TSP in G and view it as a bond/cash equivalent fund. In a major downturn if SWRs/RMDs are whacking equities I could sell convert an offsetting amount of the TSP G to C to maintain balance. I can't see any reason to roll it over to an IRA.
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Old 09-29-2017, 07:51 AM   #20
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I'm 5 years out from this 'problem'. I've been retired going on 3 years and I have not used my TSP and cannot see a need. my monthly income covers all my wants a needs at this point. I've never considered the G fund a great benefit at all. All of my money is in a livecycle fund, L 20 or whatever.
I don't see a problem for you in 5 years. If you don't need to access irregular chunks of the TSP just set it to distribute RMDs when you have to and don't roll it over. What is the advantage of an IRA in your situation?
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