Outside the TSP?

[postpete]

Looking for a little help. I have $300k in the TSP at work. When I retire in July I plan on withdrawing $800/monthly. I was thinking of leaving 100k in the TSP, that would give me 10-12 years of withdrawls. But the other 200k I was thinking of moving to an outside source. The reason being that any withdrawal from TSP comes equally from all funds, cannot just designate one fund. I would have to rebalance every month.(I think?) But if I have the 200k elsewhere I could set it and forget it for at least 10 years, going for more riskier funds. Or am I totally wrong? Thanks for the wisdom!

 

[MasterBlaster]

Looking for a little help. I have $300k in the TSP at work. When I retire in July I plan on withdrawing $800/monthly. I was thinking of leaving 100k in the TSP, that would give me 10-12 years of withdrawls. But the other 200k I was thinking of moving to an outside source. The reason being that any withdrawal from TSP comes equally from all funds, cannot just designate one fund. I would have to rebalance every month.(I think?) But if I have the 200k elsewhere I could set it and forget it for at least 10 years, going for more riskier funds. Or am I totally wrong? Thanks for the wisdom!

TSP has some of the lowest fees around. Are you sure you want to give that up ?

Your TSP funds are either balanced or they aren't. Pulling equal amounts of money out of the TSP from each fund won't change the overall balance. Balancing once a year or every other year achieves what you want. Balancing more often than that is counter-productive.


http://www.wsj.com/articles/SB10001424052970204644504576653443465733526

In a study last year, money-management firm Vanguard Group concluded that frequent or complicated rebalancing efforts have no major payoff compared with an annual or semiannual rebalancing when allocations move five percentage points away from targets. "Annual rebalancing is likely to be preferred when taxes or substantial time/costs are involved," the Vanguard study said. !

 

[RE2Boys]

The TSP G fund is unique in that the value of the fund can never decrease. I have all my TSP in the G fund as a major part of my bond portfolio, and have a Traditional IRA that is 90+ percent in equities, works out to be currently 60/30 balanced portfolio for my asset allocation, but started at 50/50 when I set it up. Of course, I have a govt pension that can also be considered a fixed income allocation.

 

[jazz4cash]

Well 800/300k is only about .25 pct and your percentages in each fund will be changing anyway so it's no big deal. You could rebalance every few months but annual rebalance or using a threshold to trigger rebalance would work. Not sufficient to forego low cost benefits of TSP IMO.


Sent from my iPhone using Early Retirement Forum

 

[Gerard3]

I, too, am a retired Fed. I would think hard and long about moving any funds out of the TSP anywhere. The TSP fund is very well managed and the costs are minimal. Of course, you should do what you ultimately want, but do it with your eyes wide open.


Look at all the options for withdrawal carefully. Would you really need to rebalance monthly (though, you can, of course, do intra-fund transfers up to the limit allowed-- two per month), but if your $800 per month comes from all funds equally (which they will), doesn't your essential allocation remain nearly the same (in terms of percentages)?


Maybe, just rebalance every year or so. Whatever you do, do so carefully and thoughtfully.


As for me, for what it's worth, I'm 57, retired two years ago, and have not yet touched my TSP (am fortunate enough, so far, to live off FERS pension and FERS supplement for basic expenses). I have no plans to move my TSP out of the TSP, due to the low TSP cost ratio. My investments within the TSP are significantly in the S, C, and I funds.


Good luck with your decision and good luck with your retirement!

 

[postpete]

Thanks Gerard3, all good points. I guess my ~3% WR would be fine no matter what fund it came from. A case of over thinking or over worrying. Right now I am in half G and half L income. Not very aggressive, just afraid of losing my small nestegg before I RE. Should probably at least move to L 2020.

 

[postpete]

Thanks Master, that is why I am here, for the wisdom.

 

[Gerard3]

It is tempting to diddle around with your mix of funds. I have done it, sometimes in a mish-mash way--mixing Lifestyle Funds with S, F, and I. But be aware that your current mix of half G and half L fund (depending on the target date of the L fund) just concocts some L-fund hybrid, in effect.


If I were in your position and intending to draw down just $800 a month, I would consider, perhaps, putting all of it, at the least, in the L 2030 fund to be a bit more aggressive (the L 2020 fund is less than four years away from the Income fund, right, and that may be too conservative for your long-term prospects?). Of course, this depends on your own comfort level and what makes you feel right.


Remember, you'll be getting a pension (either CSRS or FERS, plus FERS supplement, if FERS, then FERS pension and social security at 62, if you choose to take SS at 62), so that, in a practical sense, is your "bond" fund, your lifetime annuity, so you can be a bit more aggressive with your TSP choices, if you so desire--just my two cents and based on what I myself do with my TSP-fund choices. It may make good sense for you to keep your TSP stash in the C, S, and I funds.


But, again, it's what allows you to sleep at night and that is the most important thing.
The good thing about the TSP is that you can decide one thing now and another thing in the future.

 

[nash031]

IMO, TSP is an all-or-nothing proposition largely because of G. Like another poster, G makes up my bond portfolio, and a large portion of my TSP allocation is in G. I don't know that I'll ever pull a portion of the money out of TSP until I either need to use it or want to do something else entirely.

In the event of either of those, I believe I will roll TSP into an account where I can control the distribution and allocation more intimately.

But for now (and the long-term foreseeable future), I intend to leave TSP rolling right along with it's excellent, cheap funds.

 

[ziggy29]

If you were going to move to something else to index, not sure why you'd want to move out of TSP. Maybe you want to invest outside of TSP and leave cash in the G Fund, I don't know. But if you are going to stay in index funds, more or less, you won't find a cheaper one than what's in the TSP.

 

[Fedup]

You can move out and move back to tsp as long as you have at least $250.


Sent from my iPad using Early Retirement Forum

 

[Greg V]

The withdrawal comes from all funds (can't choose just one or two), but in proportion to their percentage of your total portfolio...not equally, except in the case where you happen to have an equal percentage in each fund.

Except for the limited withdrawal options (which may be changed in the future), the TSP is hard to beat. The funds adequately cover the major markets for indexers and the expenses are among the lowest you'll find.

 

[Fedup]

I wish they change and make it more flexible. There is no reason to make it so inflexible.


Sent from my iPad using Early Retirement Forum

 

[zinger1457]

You can move out and move back to tsp as long as you have at least $250.

With the TSP you can only do a one time partial withdrawal, any withdrawals after that has to meet the full withdrawal (all, monthly, annuity) conditions. One of the weak points of the TSP.

 

[Fedup]

With the TSP you can only do a one time partial withdrawal, any withdrawals after that has to meet the full withdrawal (all, monthly, annuity) conditions. One of the weak points of the TSP.

Right you can only move out once, but you can move back multiple times. You can vary your yearly withdrawal amount if I understand.


Sent from my iPad using Early Retirement Forum

 

[Gerard3]

Correct, if you want to change the amount you wish to withdraw monthly, you can make that change yearly:




https://www.tsp.gov/PlanParticipation/LoansAndWithdrawals/withdrawals/index.html

 

[Fedup]

So you can take as large as a withdrawal and roll it over within 60 days to another IRA if you desire. It's equivalent of a second withdrawal.


Sent from my iPad using Early Retirement Forum

 

[donheff]

Right you can only move out once, but you can move back multiple times. You can vary your yearly withdrawal amount if I understand.


Sent from my iPad using Early Retirement Forum

Correct, if you want to change the amount you wish to withdraw monthly, you can make that change yearly:




https://www.tsp.gov/PlanParticipation/LoansAndWithdrawals/withdrawals/index.html

I read the TSP withdrawals page differently. The page says, "Choose monthly payments if you want to withdraw your entire account in a series of payments spread over time. The TSP offers two choices of monthly payment: Specific Dollar Amount. You may request a specific dollar amount that you will receive each month until your entire TSP account has been paid out to you. The amount you request must be $25 or more.
Life Expectancy. You may request to have the TSP calculate your monthly payment for you using the Internal Revenue Service's (IRS) Life Expectancy Tables. Your first payment amount will be based on your age and your account balance at the time of the first payment. The TSP will recalculate your monthly payment every year."

I read that as permitting you to either go with an RMD based approach (which I plan to do) or select some other amount that will never change. I don't see anything that says you can pick monthly payments and then change them every year.

As an aside for the OP, like some others posting here I keep all of my TSP is G as a super cash/bond account. But I round out my portfolio in other accounts. I plan to take the RMD approach to withdrawals when I reach 70 because I like having the remainder in G as a psuedo cash reserve. If I have to sell equities or other losers elsewhere in a bad year, I can buy equities in the TSP with my G cash to keep things neutral until (hopefully) the losers recover.

 

[Gerard3]

See link below. Here's explicit language that states you can change your monthly amount (presuming you do not choose RMD option):

Once your withdrawal request is processed, you cannot return your withdrawal or change your withdrawal options. However, if you have chosen to receive part or all of your account in a series of TSP monthly payments, you do have options for changing and managing those payments.​

• Changing Your Monthly Payment Amount
• Managing Your Monthly Payments
• Requesting a Final Single Payment

Changing Your Monthly Payment Amount



Use Form TSP-73, Change in Monthly Payment Amount to do either of the following:​

• Change the dollar amount you are receiving every month. You may do this once a year. Your request will become effective the following January.

Or​

• Change the TSP-computed payments (based on life expectancy) to a specific dollar amount. This is a one-time-only change. Your request will become effective the following January.

https://www.tsp.gov/PlanParticipation/BeneficiaryParticipants/withdrawalsbp/changing.html

 

[donheff]

Thanks Gerard. That is good to know.

 

[jazz4cash]

The TSP has recognized that too many account holders move their funds when they leave federal service. This is due in part to some rather onerous and confusing withdrawal policies. They are looking at making changes and should only take several long years to implement policies that encourage account holders to stick with TSP.

 

[Fedup]

The TSP has recognized that too many account holders move their funds when they leave federal service. This is due in part to some rather onerous and confusing withdrawal policies. They are looking at making changes and should only take several long years to implement policies that encourage account holders to stick with TSP.

I believe they are going to improve so people don't have to leave tsp.


Sent from my iPad using Early Retirement Forum

 

[jazz4cash]

I believe they are going to improve so people don't have to leave tsp.


Sent from my iPad using Early Retirement Forum

I think most people don't "have" to leave now but just don't feel comfortable that TSP can continue to meet their needs. Biggest drawback IMO is only allowing one partial withdrawal unless you setup a monthly plan.


Sent from my iPhone using Early Retirement Forum

 

[Fedup]

I think most people don't "have" to leave now but just don't feel comfortable that TSP can continue to meet their needs. Biggest drawback IMO is only allowing one partial withdrawal unless you setup a monthly plan.


Sent from my iPhone using Early Retirement Forum

There tons of limit. One of them is that you can only move money from G fund to S, C, I twice a month. But I have seen some small incremental change that's positive like the user interface.


Sent from my iPad using Early Retirement Forum

 

[ABQ2015]

I rely heavily on the G fund for non-equities but given only a 2% return wonder whether I should be investing more in the F fund. But in the past I have not done well with the F fund and over the last couple of years have been concerned about the Federal Reserve increasing interest rates so have shied away from the bond fund.

With 1 ½ years until retirement, I am debating whether to do Roth conversions. Although I will be solidly in the 25% tax bracket being single with my FERS pension, i-ORP recommends Roth conversions. One way to convert would be a partial one time withdrawal from TSP, roll it over into a tIRA, and then do yearly conversions in small amounts perhaps to stay in the 25% tax bracket. I was also considering switching to the Roth TSP the last work year to get a head start on the process.

But the Roth TSP rules are terrible. I’d like to keep my Roth TSP in equities and can do so with my contribution allocation. But any Interfund Transfer will apply to both the traditional TSP and the Roth TSP. So if I decide to change my traditional TSP from 60/40 to 50/50, this would also apply to my Roth TSP. Any withdrawals in retirement will also apply to both so there is no way to withdraw from the traditional TSP only and preserve the Roth TSP. I know the TSP Board is considering changes for withdrawals, but these changes have to be approved by the legislators and could take years. And I doubt changes are being considered to decouple the traditional TSP and Roth TSP withdrawals.