TSP withdrawal strategies/options

[jgman]

I am retiring from the federal govt at the end of this year at age 57 and will need to tap into my TSP. It is my understanding that when I withdraw from the TSP, I cannot designate which TSP fund to withdraw from (G, C,S etc)....money automatically comes from all the funds proportionally. This could be a problem if the market dips and I am forced to take money out of my stock funds. Ideally, I would roll over my TSP into Fidelity or Vanguard but than I would be subject to the 10 percent penalty on IRA withdrawals (age penalty). Anyone have suggestions on how to manage TSP withdrawals before age 59 1/2?

 

[mz44]

I am retiring from the federal govt at the end of this year at age 57 and will need to tap into my TSP. It is my understanding that when I withdraw from the TSP, I cannot designate which TSP fund to withdraw from (G, C,S etc)....money automatically comes from all the funds proportionally. This could be a problem if the market dips and I am forced to take money out of my stock funds. Ideally, I would roll over my TSP into Fidelity or Vanguard but than I would be subject to the 10 percent penalty on IRA withdrawals (age penalty). Anyone have suggestions on how to manage TSP withdrawals before age 59 1/2?

You can always rebalance after the withdrawal. Check with HR, mine told me I wouldn't have access to the TSP for 6 months due to some sort of administrative issues.

 

[jgman]

You can always rebalance after the withdrawal. Check with HR, mine told me I wouldn't have access to the TSP for 6 months due to some sort of administrative issues.

True, but I would still prefer not to sell stock funds in a market decline.

Didn't know about the 6 month access time for the TSP. Definitely need to plan for that in advance...thanks.

 

[VanWinkle]

This website has information on the TSP withdrawals and you can contact direct with questions. Very nice guy and also a Federal employee.

https://tspcounselor.com/

 

[donheff]

If you rebalance on the same day you are withdrawing the RMD you could essentially pick the fund you want the withdrawal to come from (e.g. buy C from G to compensate for the portion of the withdrawal that will be from C). I don't know about 6 month limits, check with TSP. If so, make sure you withdraw enough

 

[zinger1457]

You won't have the 10% withdrawal penalty since you retired after you turned 55. Never heard of the 6 month wait, that doesn't sound right, I had access to my funds immediately after I left. What's the issue with rebalancing if you buy and sell at the same price? You're not paying capital gains.

 

[jgman]

This website has information on the TSP withdrawals and you can contact direct with questions. Very nice guy and also a Federal employee.

https://tspcounselor.com/

Thanks....this is a good resource

 

[jgman]

If you rebalance on the same day you are withdrawing the RMD you could essentially pick the fund you want the withdrawal to come from (e.g. buy C from G to compensate for the portion of the withdrawal that will be from C). I don't know about 6 month limits, check with TSP. If so, make sure you withdraw enough

Perfect. This will work.....Ill do this and instead of monthly withdrawals ill do quarterly or maybe just an annual withdrawal to simplify.

 

[jgman]

You won't have the 10% withdrawal penalty since you retired after you turned 55. Never heard of the 6 month wait, that doesn't sound right, I had access to my funds immediately after I left. What's the issue with rebalancing if you buy and sell at the same price? You're not paying capital gains.

The 10 percent penalty would only apply if I roll over my TSP to an IRA and then withdraw before 59 1/2. Thats the reason Im going to wait to roll it over to Fidelity.

My HR department didn't tell me about the 6 month wait, although they are pretty uninformed. That could be a problem.

When I withdraw ill just rebalance at the same time.

 

[HawkeyeNFO]

When I retired from the USN there was no 6 month wait. Nothing changed, except I couldn't contribute anymore.

 

[jgman]

When I retired from the USN there was no 6 month wait. Nothing changed, except I couldn't contribute anymore.

Ill re-check with my HR Department in December or closer to my retirement date. Hopefully the delay is no longer there. I did hear that there were alot of recent retirements, so maybe that is why.

MY HR Dept. did say my annuity will not be the full amount for several months which I am prepared for.

 

[Out of Steam]

I recently made a partial transfer from the TSP to an IRA to continue funding a periodic Roth conversion. The (kind of painful) story is in my history.

I've found dealing with the TSP difficult enough that I would suggest that you plan so as to not need irregular or single-purpose withdrawals from it, either by having sufficient non-retirement savings for needs like home repair and vehicle replacements, or funds in an IRA outside the TSP.

On second glance, I see that you plan a full transfer to an IRA after turning 59 1/2. I'm not there yet, mainly for asset protection reasons, but it's not out of the question.

 

[donheff]

jgman: The TSP site says there are no limits on withdrawals after you retire but the processing times effectively limit you to one very 30 days. It sounds like the biggest problem will be that you apparently can't do a timed withdrawal online at close of business. You have to put the request in and wait a few days so it will be hard to time your "rebalance" adjustment to the withdrawal date. You could probably log in every morning and see when the withdrawal was processed and do the rebalance action online at COB that day but if the markets changed dramatically you would could lose (or gain) a bit.

 

[Tadpole]

If this is too off-topic, just tell me and I will remove it.

I wish there were a way to permanently register your direct deposit information for purposes of the RMD. OPM, SS, etc. seamlessly direct deposits money from your retirement accounts but, for TSP, you have to request it and send the deposit information each time there is an RMD due. If you don't manually request the RMD and give this information, they automatically withdraw it on December 31 and snail mail a check to you. I haven't found a way to direct this end-of-year automatic RMD check to my bank. Is there a way to permanently ask for direct deposit of all withdrawals including automatic RMDs?

 

[jazz4cash]

HR Departments are notoriously ill-informed when it comes to retirement savings plans. It’s not really their primary job function. I just wouldn’t rely on them solely for any plan details. The practice of pro-rating transactions across all funds is a clunky relic but at least they have improved many features of TSP withdrawals. I really like Fido but I think we will always maintain TSP to have access to the G and Lifecycle Income funds.

 

[zinger1457]

Rather than waiting until the end of the year for the TSP to calculate it for you why not just set up installment payments that you know will meet your RMD requirements? Those payments can be direct deposited.

 

[Tadpole]

Rather than waiting until the end of the year for the TSP to calculate it for you why not just set up installment payments that you know will meet your RMD requirements? Those payments can be direct deposited.

Thanks, if there is no way to direct deposit the auto RMD, I may need to do just that.