TSP in Retirement

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
Bonehead3
Posts: 20
Joined: Mon Nov 05, 2018 8:05 pm

TSP in Retirement

Post by Bonehead3 » Sat Mar 09, 2019 8:48 pm

Hello--I have a question for any Thrift Saving Plan experts. I'm getting ready to retire as a fed civilian and am also retired military. So my initial thought was a total withdraw from TSP and into Vanguard IRA total stock market (existing). Well, I still want to do that but if I do a total withdraw, I'm out for good. I'm thinking of staying and leaving some in the G fund since it offers a higher interest rate than most MMF. I would consider it for my cash position.

Other thoughts on TSP after reviewing the website. They make an attempt to keep people in the TSP with some stupid videos. I called to clear up some things and thought I was talking with the worst CSR ever. She could have cared less if she answered my questions. One being how a partial withdraw works. They don't do it by funds desired to transfer but rather by amount and they proportionally take from each fund. Dumb.

Anyway, thanks for looking.

Tdubs
Posts: 859
Joined: Tue Apr 24, 2018 7:50 pm

Re: TSP in Retirement

Post by Tdubs » Sat Mar 09, 2019 9:07 pm

Well, as you noted, G Fund is the reason to leave something behind. Given the equality of ERs for such index funds, consolidating everything else into a TSM makes a lot of sense.

Dontridetheindexdown
Posts: 85
Joined: Sat Feb 14, 2015 10:08 pm

Re: TSP in Retirement

Post by Dontridetheindexdown » Sat Mar 09, 2019 9:12 pm

I am also retired military and civil service.

Standard advice to all, both young and old, who have TSP investments - NEVER LEAVE TSP ENTIRELY!

Most important reason is the G Fund, which is found nowhere else.

Yes, stable value funds and money market funds exist, but the G Fund is unique.

I will leave it as an exercise for others to explain why that is so.

I am in my late 60s, and keep significant assets in G Fund as part of my stable asset allocation.

This affords me the freedom to take higher risks in equity allocation outside of TSP.

My wife, in her early 60s, keeps minimal assets in G Fund, with intent to transfer significant assets (presently equities) into G Fund during her late 60s.

Feel free to PM me for additional discussion.

rkhusky
Posts: 7586
Joined: Thu Aug 18, 2011 8:09 pm

Re: TSP in Retirement

Post by rkhusky » Sat Mar 09, 2019 9:14 pm

Bonehead3 wrote:
Sat Mar 09, 2019 8:48 pm
One being how a partial withdraw works. They don't do it by funds desired to transfer but rather by amount and they proportionally take from each fund. Dumb.
But you can rebalance to whatever you want (within the accuracy of whole number percentages) after the transfer.

The TSP withdrawal method makes it easier for people who don't want their AA to change after a withdrawal. They can do it in one step, whereas, since you want an AA change, you have to use two steps.

Here's an example: You have $100K in C and $100K in G. You want to move all of C to an IRA. You sell $100K, which leaves you with $50K in C and $50K in G. You do an interfund transfer with 100% G and 0% C. You now have $100K in G and $0K in C.
Last edited by rkhusky on Sun Mar 10, 2019 6:36 am, edited 2 times in total.

Morgan Dollar 1921
Posts: 166
Joined: Tue Jul 17, 2018 9:04 am

Re: TSP in Retirement

Post by Morgan Dollar 1921 » Sat Mar 09, 2019 9:16 pm

We jumped ship to Fidelity, she (DW), a PM at USPS,liked the G fund, it is a carrot, but THEY are toying with a lower rate for TSP members in the previous budget proposals and in CBO alternatives. Without getting too political, (play nice here) I will say that our first year out, we matched a rate of return that the G fund produced last year and beat the rest of the TSP funds. DW wanted the simplicity of one shop, and the service at the TSP has had it's moments. We allocated 28% equity, 40% brokered CD's that are laddered and started light as we knew rates would go up from Nov. 2017. I kept buying CD's as the rates climbed then a couple extra when two years hit 3%,, wish I had latched onto more. Many of the early CD's were short term, as we expected rates to rise. The rest was in Money market mutual fund that has increased in return until maybe recently. The equity position was mainly ETF 's but did use one growth mutual fund and also small positions of two individual stocks. In hindsight after landing here, I would have done two ETF's instead of the eight we have now. She is against foreign, as she watched the I fund go nowhere for several years.
I would tell you to consider Fidelity based on our experiences and the ease of brokered CD's if that is an area you want to use. I have read that Vanguard requires a CD purchase of 10K, where you can buy CD's at Fidelity in $1,000 amounts. Best check me on that, it may have changed recently at Vanguard. I have a Vanguard account and like it well enough, it is my set it and forget accout with the simple asset allocation and three ETF's.
There were some trapdoors in the old TSP withdrawal methods, but they have changed and I am not up to speed on those. Good luck!

Morgan Dollar 1921
Posts: 166
Joined: Tue Jul 17, 2018 9:04 am

Re: TSP in Retirement

Post by Morgan Dollar 1921 » Sat Mar 09, 2019 9:26 pm

My post above was started prior to any other answers, (slow typist) and not meant to be a rebuttal to anyone of the above. One of the issues was if you took monthly payouts the mortality tables changed at age 70 I think, and your pay out was subject to drop. I believe this issue has been corrected with the new regs and rules on withdrawal, but it was too little too late for us, timing wise.

Here are the final 2018 TSP wrap up numbers from Dec 31:
G Fund $15.9923 $0.0040 0.03% 2.9072% $15.9923 $15.5426
F Fund $18.1428 $0.0432 0.24% 0.1535% $18.1428 $17.5877
C Fund $35.9523 $0.3072 0.86% -4.4084% $41.8001 $33.7031
S Fund $43.9772 $0.4066 0.93% -9.2619% $54.6885 $41.1846
I Fund $26.7131 $0.1150 0.43% -13.4254% $32.8666 $25.9428

2.91 is a good rate, but if you manage your CD's it is easy to match.

User avatar
TimeRunner
Posts: 1575
Joined: Sat Dec 29, 2012 9:23 pm

Re: TSP in Retirement

Post by TimeRunner » Sat Mar 09, 2019 10:43 pm

At the very least, I'd leave $1K in the TSP as you transfer out the rest. That gives you the option of transferring back in some chunk of money that you would want to put in the G fund as your bond allocation, while keeping the rest at Fido or Schwab (or Vanguard if you insist). Transfer the TSP TIRA to a TIRA, the TSP Roth to a Roth, and then enjoy your $990 TIRA and probably around $10 TSP Roth (as an example). Then sit back and see what the new withdrawal rules are at TSP, coming this Sept/Oct. That will largely determine if it makes sense to transfer back money into the G Fund to use as your bond allocation, or possibly transfer back everything if the TSP becomes customer friendly. (I have big doubts about that.) But yes, keep a foot in the door by keeping a minimal amount in the TSP because that gives you the ability to transfer back in if you determine it's advantageous. My dos centavos. :beer
One cannot enlighten the unconscious.

4nwestsaylng
Posts: 509
Joined: Thu Jun 15, 2017 2:03 am

Re: TSP in Retirement

Post by 4nwestsaylng » Sat Mar 09, 2019 10:48 pm

I agree that CD rates are pretty competitive with G fund, and of course by definition they are "stable value". I have not used CDs but I think it is time to consider them, since the fixed income part of my portfolio is not being drawn on , so a time commitment of a CD is not an issue. I would be curious to learn other BHs view of CDs vs the G fund.

I use my TSP as the bond part of my AA, and it is primarily in G fund,with some F fund. The low ER of 0.04% is really now closely matched by alternatives, such as BND (0.05%), so I think I will be transferring much of the fixed income over to my Schwab IRA, but leave some in G fund TSP until I find a good reason (perhaps CDs) to simply nearly close it (will always leave the door open.)

The reason the G fund did so well last year with rising interest rates was the stable value aspect of the fund, compared to the F fund, which, like BND took hit from duration NAV effect.So far this year, F fund has outperformed G by one percent to date (G 0.45% vs F approx 1.45%) only because the FED
paused on rate rises. It is tempting to leave stable value for F or BND, but if rate rises resume, there will be a loss of NAV compared to G or a CD.
Last edited by 4nwestsaylng on Sat Mar 09, 2019 10:53 pm, edited 1 time in total.

delamer
Posts: 9324
Joined: Tue Feb 08, 2011 6:13 pm

Re: TSP in Retirement

Post by delamer » Sat Mar 09, 2019 10:49 pm

TimeRunner wrote:
Sat Mar 09, 2019 10:43 pm
At the very least, I'd leave $1K in the TSP as you transfer out the rest. That gives you the option of transferring back in some chunk of money that you would want to put in the G fund as your bond allocation, while keeping the rest at Fido or Schwab (or Vanguard if you insist). Transfer the TSP TIRA to a TIRA, the TSP Roth to a Roth, and then enjoy your $990 TIRA and probably around $10 TSP Roth (as an example). Then sit back and see what the new withdrawal rules are at TSP, coming this Sept/Oct. That will largely determine if it makes sense to transfer back money into the G Fund to use as your bond allocation, or possibly transfer back everything if the TSP becomes customer friendly. (I have big doubts about that.) But yes, keep a foot in the door by keeping a minimal amount in the TSP because that gives you the ability to transfer back in if you determine it's advantageous. My dos centavos. :beer
I agree with the suggestion to wait and see what happens with the rule changes in the Fall.

02nz
Posts: 2537
Joined: Wed Feb 21, 2018 3:17 pm

Re: TSP in Retirement

Post by 02nz » Sat Mar 09, 2019 10:59 pm

I would keep TSP and use the G Fund for your entire bond allocation, and not just treat it as a money market equivalent. The G Fund offers the returns of intermediate treasuries but with no duration risk, a unique deal that some call a "free lunch." I'd say it's superior to any bond fund available to the general public.

3504PIR
Posts: 850
Joined: Mon Jul 26, 2010 2:46 am

Re: TSP in Retirement

Post by 3504PIR » Sat Mar 09, 2019 11:09 pm

I am retired military and will retire from the GS world in May. I haven’t decided on exactly what my plans are for the TSP portion of our portfolio, as we won’t be accessing our funds for about 4 more years after we are able to at age 59.5, if then. My TSP is 100% G fund, which except for some I bonds makes up the bond portion of our portfolio. While we can transfer out after May, I don’t expect to completely leave the TSP simply due to the G fund. I’ll leave at least half our bonds in the G fund as a rough idea in my head, but know I won’t get out completely.

Topic Author
Bonehead3
Posts: 20
Joined: Mon Nov 05, 2018 8:05 pm

Re: TSP in Retirement

Post by Bonehead3 » Sat Mar 09, 2019 11:18 pm

Many thanks for the quick replies. I"m not leaving until the end of the year so have some time but it will go quick (I hope!) :D

Thanks Don'tride for that. I have not done my homework for the TSP; I just max it out and do the Bogle don't just stand there, do nothing policy. I will PM for a little off topic discussion.

Husky...that is exactly what I figured so I thought to re-balance prior to partial transfer but I guess either way will work. A few days of price change risk could go either way.

Morgan I used CD's as a kid since that is what my parents did but eventually went into stock funds. I just bought a 13 month CD in January for the first time since then. A little higher rate and will need the money when retiring to purchase a house.

Time...I did not know you could switch between IRA and TSP. I just read we can no longer make contributions to TSP after retirement. So guess that means new money. Wow, that gives me some more flexibility.

Thanks all.

rkhusky
Posts: 7586
Joined: Thu Aug 18, 2011 8:09 pm

Re: TSP in Retirement

Post by rkhusky » Sun Mar 10, 2019 6:41 am

Bonehead3 wrote:
Sat Mar 09, 2019 11:18 pm
I did not know you could switch between IRA and TSP. I just read we can no longer make contributions to TSP after retirement. So guess that means new money. Wow, that gives me some more flexibility.
Note that you can only roll a Traditional IRA into the TSP, not a Roth IRA.

carol-brennan
Posts: 277
Joined: Thu Dec 27, 2018 3:19 pm

Re: TSP in Retirement

Post by carol-brennan » Sun Mar 10, 2019 7:10 am

Morgan Dollar 1921 wrote:
Sat Mar 09, 2019 9:16 pm
We jumped ship to Fidelity, she (DW), a PM at USPS,liked the G fund, it is a carrot, but THEY are toying with a lower rate for TSP members in the previous budget proposals and in CBO alternatives. Without getting too political, (play nice here) I will say that our first year out, we matched a rate of return that the G fund produced last year and beat the rest of the TSP funds. DW wanted the simplicity of one shop, and the service at the TSP has had it's moments. We allocated 28% equity, 40% brokered CD's that are laddered and started light as we knew rates would go up from Nov. 2017. I kept buying CD's as the rates climbed then a couple extra when two years hit 3%,, wish I had latched onto more. Many of the early CD's were short term, as we expected rates to rise. The rest was in Money market mutual fund that has increased in return until maybe recently. The equity position was mainly ETF 's but did use one growth mutual fund and also small positions of two individual stocks. In hindsight after landing here, I would have done two ETF's instead of the eight we have now. She is against foreign, as she watched the I fund go nowhere for several years.
I would tell you to consider Fidelity based on our experiences and the ease of brokered CD's if that is an area you want to use. I have read that Vanguard requires a CD purchase of 10K, where you can buy CD's at Fidelity in $1,000 amounts. Best check me on that, it may have changed recently at Vanguard. I have a Vanguard account and like it well enough, it is my set it and forget accout with the simple asset allocation and three ETF's.
There were some trapdoors in the old TSP withdrawal methods, but they have changed and I am not up to speed on those. Good luck!
Sounds like a lot of work to match what you could have gotten in the TSP by staying put.

Morgan Dollar 1921
Posts: 166
Joined: Tue Jul 17, 2018 9:04 am

Re: TSP in Retirement

Post by Morgan Dollar 1921 » Sun Mar 10, 2019 9:47 am

carol-brennan wrote:
Sun Mar 10, 2019 7:10 am
Morgan Dollar 1921 wrote:
Sat Mar 09, 2019 9:16 pm
We jumped ship to Fidelity, she (DW), a PM at USPS,liked the G fund, it is a carrot, but THEY are toying with a lower rate for TSP members in the previous budget proposals and in CBO alternatives. Without getting too political, (play nice here) I will say that our first year out, we matched a rate of return that the G fund produced last year and beat the rest of the TSP funds. DW wanted the simplicity of one shop, and the service at the TSP has had it's moments. We allocated 28% equity, 40% brokered CD's that are laddered and started light as we knew rates would go up from Nov. 2017. I kept buying CD's as the rates climbed then a couple extra when two years hit 3%,, wish I had latched onto more. Many of the early CD's were short term, as we expected rates to rise. The rest was in Money market mutual fund that has increased in return until maybe recently. The equity position was mainly ETF 's but did use one growth mutual fund and also small positions of two individual stocks. In hindsight after landing here, I would have done two ETF's instead of the eight we have now. She is against foreign, as she watched the I fund go nowhere for several years.
I would tell you to consider Fidelity based on our experiences and the ease of brokered CD's if that is an area you want to use. I have read that Vanguard requires a CD purchase of 10K, where you can buy CD's at Fidelity in $1,000 amounts. Best check me on that, it may have changed recently at Vanguard. I have a Vanguard account and like it well enough, it is my set it and forget accout with the simple asset allocation and three ETF's.
There were some trapdoors in the old TSP withdrawal methods, but they have changed and I am not up to speed on those. Good luck!
Sounds like a lot of work to match what you could have gotten in the TSP by staying put.
I guess what I failed to explain, and you also did not grasp was the return on the entire balance matched the G fund, not just the fixed portion.

Remember your statement now has the benefit of hindsight.

Really a solid return she thought with the S & P 500 total return for 2018 of somewhere below -4 %. I refer to the TSP C fund final wrap up.

(C Fund $35.9523 $0.3072 0.86% -4.4084% $41.8001 $33.7031)

User avatar
Earl Lemongrab
Posts: 7270
Joined: Tue Jun 10, 2014 1:14 am

Re: TSP in Retirement

Post by Earl Lemongrab » Sun Mar 10, 2019 7:25 pm

02nz wrote:
Sat Mar 09, 2019 10:59 pm
I would keep TSP and use the G Fund for your entire bond allocation, and not just treat it as a money market equivalent. The G Fund offers the returns of intermediate treasuries but with no duration risk, a unique deal that some call a "free lunch." I'd say it's superior to any bond fund available to the general public.
Not a free lunch, and middle of the pack rate-wise compared to stable-value funds available in qualified plans. It does have very good security of course, but that's difficult to value.

MegaCorp's SV fund has closely tracked G over the years. I have been 50/50 bond index and SV over the years.

User avatar
Watty
Posts: 17625
Joined: Wed Oct 10, 2007 3:55 pm

Re: TSP in Retirement

Post by Watty » Sun Mar 10, 2019 11:15 pm

You need to be sure to understand that the TSP inhertance rules are different from IRA inhertance rules and that they are much less favorable in some situations. Here is what I have posted on that before.
Whenever someone post about having a large TSP I try to point out the inheritance problems that they have. The is a wiki on this.

https://www.bogleheads.org/wiki/TSP_estate_planning

There was a post where someone had run into this situation;

1) Dad had a large TSP, he died and left it to his wife as a beneficiary participant.
2) That was fine for the wife.
3) A few years later the wife died and left it to their kid.

The kid could not leave the money in the TSP and they could also not roll it out to an inherited IRA so they were forced to withdraw all the money and be taxed on it. The kid was already in a high tax bracket so that put them in a very high tax bracket.

If either the Mom or Dad had rolled the TSP money out to an IRA they could have avoided a six figure tax bill.

You should research this and consider if you really want to leave the money in the TSP once you retire.

krafty81
Posts: 241
Joined: Thu Jul 05, 2018 2:01 pm
Location: San Diego, CA

Re: TSP in Retirement

Post by krafty81 » Sun Mar 10, 2019 11:22 pm

I retired from USN four years ago. I have kept my large TSP account intact. Happy with that.

Topic Author
Bonehead3
Posts: 20
Joined: Mon Nov 05, 2018 8:05 pm

Re: TSP in Retirement

Post by Bonehead3 » Mon Mar 11, 2019 10:32 am

Watty wrote:
Sun Mar 10, 2019 11:15 pm
You need to be sure to understand that the TSP inhertance rules are different from IRA inhertance rules and that they are much less favorable in some situations. Here is what I have posted on that before.
Whenever someone post about having a large TSP I try to point out the inheritance problems that they have. The is a wiki on this.

https://www.bogleheads.org/wiki/TSP_estate_planning

There was a post where someone had run into this situation;

1) Dad had a large TSP, he died and left it to his wife as a beneficiary participant.
2) That was fine for the wife.
3) A few years later the wife died and left it to their kid.

The kid could not leave the money in the TSP and they could also not roll it out to an inherited IRA so they were forced to withdraw all the money and be taxed on it. The kid was already in a high tax bracket so that put them in a very high tax bracket.

If either the Mom or Dad had rolled the TSP money out to an IRA they could have avoided a six figure tax bill.

You should research this and consider if you really want to leave the money in the TSP once you retire.
This did not sound correct. I read up on it a little today. The TSP Beneficiary Guide described the inheritance but so discreetly and not with a LOUD warning which they should have. They said the spouse is okay and children can't transfer it to a inherited IRA but will have to take receipt of the money.

So my wife and I ride motorcycles. We get in a crash and unfortunately, we both perish. My xx value TSP will go to the kids and they pay taxes, right? So barring we both go together, if I go first (likely) and my spouse inherits the TSP, she should immediately do a total transfer to an IRA to protect from a lump tax bill by kids when she goes. Correct?

chemocean
Posts: 114
Joined: Mon Dec 19, 2016 9:45 pm

Re: TSP in Retirement

Post by chemocean » Mon Mar 11, 2019 11:03 am

Concerning estate planning, I understand that non-spousal beneficiaries can not transfer the money to a TSP inherited IRA. I currently have my secondary beneficiary for TSP funds as a conduit trust for my children according to my Will. I was told by TSP that the executor of my estate can have my TSP funds transferred directly to an inherited IRA within the Trust as a non-taxable event. The setting up trust means I have to go through the probate court, which in my state is not onerous and is desirable in my situation according to the latest series of articles by Mark Keen in the NARFE magazine. Before I change my will to name my children named directly as secondary TSP beneficiaries, I will need to research to see if TSP funds can be transferred to an inherited IRA in ANOTHER institution as a non-taxable event after my death.

User avatar
Watty
Posts: 17625
Joined: Wed Oct 10, 2007 3:55 pm

Re: TSP in Retirement

Post by Watty » Mon Mar 11, 2019 11:41 am

chemocean wrote:
Mon Mar 11, 2019 11:03 am
Before I change my will to name my children named directly as secondary TSP beneficiaries, I will need to research to see if TSP funds can be transferred to an inherited IRA in ANOTHER institution as a non-taxable event after my death.
I am not a tax pro but I am pretty sure that how the beneficiary is named on your retirement account is what determines who gets it and it really does not matter what will says.

It would not be good to depend on your wife making changes after you die since she may die a few months later or by then she could be elderly and not very financially capable.

Topic Author
Bonehead3
Posts: 20
Joined: Mon Nov 05, 2018 8:05 pm

Re: TSP in Retirement

Post by Bonehead3 » Mon Mar 11, 2019 12:54 pm

Watty wrote:
Mon Mar 11, 2019 11:41 am
chemocean wrote:
Mon Mar 11, 2019 11:03 am
Before I change my will to name my children named directly as secondary TSP beneficiaries, I will need to research to see if TSP funds can be transferred to an inherited IRA in ANOTHER institution as a non-taxable event after my death.
I am not a tax pro but I am pretty sure that how the beneficiary is named on your retirement account is what determines who gets it and it really does not matter what will says.

It would not be good to depend on your wife making changes after you die since she may die a few months later or by then she could be elderly and not very financially capable.
I looked at some of the TSP beneficiary information. Some of it seems to contradict itself. It says you can name a trust as a beneficiary but if it's outside of an IRA, I would think taxes would be owed by the trust all in one shot, which we are trying to avoid. I don't why they placed such restrictive rules on non-spouse beneficiaries. Would it not be better to just transfer out of the TSP and into an IRA so kids can take distributions without getting a one year hard hit?

Also, chem, you have to go through probate with a trust? I thought the primary purpose of a trust is to avoid probate.

User avatar
hoppy08520
Posts: 2136
Joined: Sat Feb 18, 2012 11:36 am

Re: TSP in Retirement

Post by hoppy08520 » Mon Mar 11, 2019 2:40 pm

Bonehead3 wrote:
Mon Mar 11, 2019 12:54 pm
Watty wrote:
Mon Mar 11, 2019 11:41 am
chemocean wrote:
Mon Mar 11, 2019 11:03 am
Before I change my will to name my children named directly as secondary TSP beneficiaries, I will need to research to see if TSP funds can be transferred to an inherited IRA in ANOTHER institution as a non-taxable event after my death.
I am not a tax pro but I am pretty sure that how the beneficiary is named on your retirement account is what determines who gets it and it really does not matter what will says.

It would not be good to depend on your wife making changes after you die since she may die a few months later or by then she could be elderly and not very financially capable.
I looked at some of the TSP beneficiary information. Some of it seems to contradict itself. It says you can name a trust as a beneficiary but if it's outside of an IRA, I would think taxes would be owed by the trust all in one shot, which we are trying to avoid. I don't why they placed such restrictive rules on non-spouse beneficiaries. Would it not be better to just transfer out of the TSP and into an IRA so kids can take distributions without getting a one year hard hit?

Also, chem, you have to go through probate with a trust? I thought the primary purpose of a trust is to avoid probate.
Seems to be a lot of confusion about TSP beneficiary rules. Check wiki for details: TSP estate planning.

If the original TSP account holder dies, and a child is a beneficiary, the child can roll over his/her benefit to an inherited IRA; the child cannot stay in the TSP...only a surviving spouse can. The problem occurs if the original account holder names his/her spouse as a beneficiary, and the spouse stays in the TSP (as what is called a "beneficiary participant" which can only be surviving spouses), and then the spouse dies: if the surviving spouse named a child as the TSP beneficiary, then that child (called a "successor beneficiary") must take the benefit as a taxable distribution because they will not be allowed to roll that into an inherited IRA, and will not be allowed to stay in the TSP.

What this means is that a surviving spouse who inherits a TSP from their spouse, should roll that over to an inherited IRA pronto if they want to bequeath to their children and keep the money in a tax-protected status.

brucebuck1010
Posts: 10
Joined: Wed Feb 07, 2018 4:39 pm

Re: TSP in Retirement

Post by brucebuck1010 » Mon Mar 11, 2019 3:18 pm

If you are less than 59.5 years old another reason to keep some money in the TSP is because you can withdraw it, if you want, if you have retired. Any other IRA that you might roll into has to sit there until you are 59.5 (without penalty, anyhow).

-Bruce

rj49
Posts: 515
Joined: Wed Feb 23, 2011 12:22 am

Re: TSP in Retirement

Post by rj49 » Mon Mar 11, 2019 3:39 pm

I'd put everything in the L Income fund, which has some stocks and bonds but shouldn't have any significant, sustained losses due to the G fund allocation. Then simply set withdrawals set up for mortality tables, and leave it alone forever. That's how I set up my TSP when I retired from the military, using 72T withdrawals. Then you have a third monthly income source and enjoy retirement instead of having the temptation to buy and trade in a retirement account (which for most people results in market timing and lower returns).

If you want more stock allocation, stick a set amount of your pension income in a taxable account, which would minimize regrets in case of a bear market, allow dollar-cost-averaging and compounding to work their magic, and give you much better tax treatment of the equities (as long as you hold them long enough to qualify for low LTCG rates). Wade Pfau has written about how it makes better sense for retirees to increase stock allocation as they progress in retirement, especially valuable for someone with three secure, inflation-adjusted income sources (the G fund has returned double the inflation rate since 1987).

I definitely wouldn't feel comfortable doing a big lump-sum deposit into TSM now, after a historic US bull market--ask yourself how you'd feel if the money you invested lost 40% or more, as has happened several times before. I also wouldn't trade out the G fund for CDs, since the G fund is based on longer-term Treasury rates and increase automatically as interest rates rise, whereas CDs not only lock you into a rate but are slower to adjust to interest rate increases. Again, if you want to play with CDs, to stash savings or have as an emergency fund, do it with retirement income money, not wasting the valuable assets in the TSP. Personally, with the VG Prime MMF at almost 2.5% and online banks over 2%, it's not worth my time now to chase CDs.

User avatar
hoppy08520
Posts: 2136
Joined: Sat Feb 18, 2012 11:36 am

Re: TSP in Retirement

Post by hoppy08520 » Mon Mar 11, 2019 4:20 pm

If nothing else, leave a token balance in you TSP and don't close the account. I am not sure what the minimum balance is, I think it might be $200. There may come a day where you might want to transfer some money back in, and if you close your account, you'll never get that option again.

I left Federal service in the mid-1990s, and I kept my TSP after contributing to it for 5 years as a low-salary employee in my first real job. I didn't know anything about investing. I didn't even know it at the time, but I had everything in the C Fund (S&P 500 Index fund). I started learning more about investing until around 2008. Around that time, I almost let a financial advisor talk me into rolling my TSP into an IRA (with a loaded fund, of course), but thank goodness I didn't. I discovered Bogleheads index investing in 2012, and now the TSP is an important part of my overall portfolio and I'm so glad I held on to it during my years of ignorance.

delamer
Posts: 9324
Joined: Tue Feb 08, 2011 6:13 pm

Re: TSP in Retirement

Post by delamer » Mon Mar 11, 2019 5:30 pm

brucebuck1010 wrote:
Mon Mar 11, 2019 3:18 pm
If you are less than 59.5 years old another reason to keep some money in the TSP is because you can withdraw it, if you want, if you have retired. Any other IRA that you might roll into has to sit there until you are 59.5 (without penalty, anyhow).

-Bruce
This is not strictly true.

Under IRS Rule 72(t), you can make penalty-free withdrawals before age 59.5 from an IRA if you set up substantially equal periodic payments.

Anyone retiring before 59.5 should become familiar with this option.

chemocean
Posts: 114
Joined: Mon Dec 19, 2016 9:45 pm

Re: TSP in Retirement

Post by chemocean » Mon Mar 11, 2019 8:12 pm

As with any non-spousal IRA, you cannot rollover your non-spousal TSP benefits into your IRA. BUT you can rollover your non-spousal
benefits into an INHERITED IRA at another institution as a non-taxable event. The beneficiary needs to first establish an inherited IRA at another financial institution, then transfer the TSP funds to that inherited IRA. As the TSP document Booklet 31 (published January 2019) below indicates, the beneficiary uses TSP-81 to effect this transfer. Unfortunately, I was not able to find form TSP-81 on the TSP website. The booklet also indicates that the rules governing inherited IRA as complicated (especially the timing of the first RMD even for a twenty-something).

According to TSPk31.pdf


"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. An inherited IRA is
established specifically for the purpose of transferring
money inherited from a plan such as the TSP.
Inherited IRAs may provide significant tax benefits
because their required distributions can generally
be spread across the lifetime of the beneficiary.
However, the rules governing inherited IRAs are
complicated, and there are restrictions. So before
making a decision to transfer money from the TSP
into such an IRA, we strongly recommend that a
beneficiary discuss the details of the transfer with
a tax advisor or IRA provider. To transfer a death
benefit payment to an inherited IRA or to request
that it be deposited directly into a checking or savings
account, complete Form TSP-81, Death Benefit
Election for a Non-Spouse Beneficiary. A TSP death
benefit paid directly to a non-spouse beneficiary
may not be rolled over into an IRA or plan.
For more information, see the TSP tax notice
Important Tax Information About Thrift Savings Plan
Death Benefit Payments.

DrGoogle2017
Posts: 2528
Joined: Mon Aug 14, 2017 12:31 pm

Re: TSP in Retirement

Post by DrGoogle2017 » Mon Mar 11, 2019 8:22 pm

I’m thinking of closing my husband’s account in a few years. I did leave some money in case I have to move his money back. But after 5 years, I think I’ve managed with CDs, not ideal, I have money tied up longer, but once I set a permanent AA, I don’t care. I just want to tie up all the loose ends before I get too old. It’s like pulling teeth even with a small HSA.

User avatar
Jerry55
Posts: 696
Joined: Tue Jan 27, 2015 1:56 am
Location: That Toddlin' Town

Re: TSP in Retirement

Post by Jerry55 » Mon Mar 11, 2019 10:36 pm

I won't get into beneficiaries, IRA's or others, but I certainly will NEVER leave the TSP.
I retired in 2012, and besides some outside accounts, 100% of my TSP assets are in the C, S and I funds where they will stay for at least another 2-4 years. I will turn 64 in a few months and I understand the TSP is making some changes. I will see what they are, but I'll never leave it. I feel fortunate that I won't be withdrawing anything until RMD time, in another 6-7 yrs or so. I love the G, and possibly the L income funds (for now)
I know you said you'll be retiring soon, and maybe that meant December 2018, so good luck with your choices.
Retired CSRS on 12/19/2012 @ age 57 w/39 years | Good Bye Tension, Hello Pension !!!

brucebuck1010
Posts: 10
Joined: Wed Feb 07, 2018 4:39 pm

Re: TSP in Retirement

Post by brucebuck1010 » Tue Mar 12, 2019 8:32 am

delamer wrote:
Mon Mar 11, 2019 5:30 pm
Under IRS Rule 72(t), you can make penalty-free withdrawals before age 59.5 from an IRA if you set up substantially equal periodic payments.

Anyone retiring before 59.5 should become familiar with this option.
I'm familiar now - thanks! Retiring at year's end.
-Bruce

michaelingp
Posts: 231
Joined: Tue Jan 17, 2017 8:46 pm

Re: TSP in Retirement

Post by michaelingp » Tue Mar 12, 2019 11:40 am

I have 100% of my TSP in the G fund, which is about 1/2 the bond allocation of my portfolio. I intend to follow the conventional wisdom, if I die first, my wife converts to an IRA. Many posts here have said, in essence, "Bad idea, what if she is too old to follow instructions?" I cannot predict the future, but I'm leaving enough documentation around that hopefully my children will assist her, and if not, it's just money, folks.

Humty30
Posts: 1
Joined: Wed Mar 13, 2019 7:54 pm

TSP Pre-retirement

Post by Humty30 » Wed Mar 13, 2019 8:01 pm

I have a substantial TSP balance, 61 now and plan on retiring in 7 years. A prospective advisor advised I should withdraw the balance now and invest in his products, several of which are annuity hybrids that can ostensibly also work as Long Term Care insurance. Why would I want withdraw my funds now while I still have 7 years of contributions, matches, compounding and low maintenance fees?

Thank you in advance.

User avatar
hoppy08520
Posts: 2136
Joined: Sat Feb 18, 2012 11:36 am

Re: TSP Pre-retirement

Post by hoppy08520 » Wed Mar 13, 2019 8:50 pm

Humty30 wrote:
Wed Mar 13, 2019 8:01 pm
I have a substantial TSP balance, 61 now and plan on retiring in 7 years. A prospective advisor advised I should withdraw the balance now and invest in his products, several of which are annuity hybrids that can ostensibly also work as Long Term Care insurance. Why would I want withdraw my funds now while I still have 7 years of contributions, matches, compounding and low maintenance fees?

Thank you in advance.
This salesman clearly doesn’t represent your best interests. Ask him if he will adhere to the fiduciary standard. His answer will be telling.

Topic Author
Bonehead3
Posts: 20
Joined: Mon Nov 05, 2018 8:05 pm

Re: TSP Pre-retirement

Post by Bonehead3 » Thu Mar 14, 2019 1:03 am

hoppy08520 wrote:
Wed Mar 13, 2019 8:50 pm
Humty30 wrote:
Wed Mar 13, 2019 8:01 pm
I have a substantial TSP balance, 61 now and plan on retiring in 7 years. A prospective advisor advised I should withdraw the balance now and invest in his products, several of which are annuity hybrids that can ostensibly also work as Long Term Care insurance. Why would I want withdraw my funds now while I still have 7 years of contributions, matches, compounding and low maintenance fees?

Thank you in advance.
This salesman clearly doesn’t represent your best interests. Ask him if he will adhere to the fiduciary standard. His answer will be telling.
This getting a little off my original post but that is okay. I can't let this go without my comment. Hoppy is dead on regarding your interests. I disagree with him on asking about the standards. These guys practice overcoming objections and they are good at it. Forget the BS that they come up with; just compare the loads and fees they are charging for their extensive "advice" which is nothing but a guess and the stats bear that out. TSP and VG are fairly neck in neck with expense fees. TSP (indexing) is the way to go with the exception of the inheritance policy and that is just a notice to everyone to make sure your heirs are educated on what needs to be done to avoid Unc Sam reaching too far into your pockets. So my advice: Don't even talk with any of these "investment professionals" again. They are there for themselves and not you!! I know, I used to be one.

Daddio1949
Posts: 2
Joined: Sun Feb 17, 2013 6:25 am

Re: TSP in Retirement

Post by Daddio1949 » Thu Mar 14, 2019 11:13 am

Here is another consideration in retirement, a backdoor Roth.

If you are retired and less than RMD age (70 ½ years old), there is reason for moving some of your TSP retirement account to a retirement account outside of TSP. Prior to reaching the RMD age, you can
1. withdraw money from TSP (or an IRA),
2. deposit the money into a IRA,
3. convert to a Roth IRA, and
4. pay the taxes.
This process is referred to as a backdoor Roth IRA, see https://www.bogleheads.org/wiki/Backdoor_Roth

However, once you reach RMD age, the RMD amount cannot deposited into a Roth. Note, if the distribution exceeds the RMD, the excess above the RMD amount can be deposited into a Roth.

To illustrate, currently my wife is 70 years old and I am 69. So, this year my wife reached her RMD age, but last November she withdrew her TSP money, deposited the money into IRA, converted to a Roth IRA, and paid the taxes. If she had done the same transaction this year, the RMD amount could not be deposited into a Roth. I will be doing the same process this year as I have not reached the RMD age. In 2020 only amount in excess of the RMD amount could be deposited into a Roth.

This conversion made sense for us because our RMD amounts would be deposited into an investment account. Unfortunately, TSP does not allow converting funds in a traditional TSP to a Roth TSP.

User avatar
Earl Lemongrab
Posts: 7270
Joined: Tue Jun 10, 2014 1:14 am

Re: TSP Pre-retirement

Post by Earl Lemongrab » Thu Mar 14, 2019 1:24 pm

Humty30 wrote:
Wed Mar 13, 2019 8:01 pm
I have a substantial TSP balance, 61 now and plan on retiring in 7 years. A prospective advisor advised I should withdraw the balance now and invest in his products, several of which are annuity hybrids that can ostensibly also work as Long Term Care insurance. Why would I want withdraw my funds now while I still have 7 years of contributions, matches, compounding and low maintenance fees?
The "why" is simple. This adviser has expenses. Car payments, mortgage, private school for the kids. Someone needs to pay for that! Maybe that someone is you.

carol-brennan
Posts: 277
Joined: Thu Dec 27, 2018 3:19 pm

Re: TSP Pre-retirement

Post by carol-brennan » Thu Mar 14, 2019 1:29 pm

Earl Lemongrab wrote:
Thu Mar 14, 2019 1:24 pm
The "why" is simple. This adviser has expenses. Car payments, mortgage, private school for the kids. Someone needs to pay for that! Maybe that someone is you.
Correct.

Do not leave the TSP. It's the best thing out there.

User avatar
White Coat Investor
Posts: 14269
Joined: Fri Mar 02, 2007 9:11 pm
Location: Greatest Snow On Earth

Re: TSP in Retirement

Post by White Coat Investor » Thu Mar 14, 2019 3:41 pm

Bonehead3 wrote:
Sat Mar 09, 2019 8:48 pm
Hello--I have a question for any Thrift Saving Plan experts. I'm getting ready to retire as a fed civilian and am also retired military. So my initial thought was a total withdraw from TSP and into Vanguard IRA total stock market (existing). Well, I still want to do that but if I do a total withdraw, I'm out for good. I'm thinking of staying and leaving some in the G fund since it offers a higher interest rate than most MMF. I would consider it for my cash position.

Other thoughts on TSP after reviewing the website. They make an attempt to keep people in the TSP with some stupid videos. I called to clear up some things and thought I was talking with the worst CSR ever. She could have cared less if she answered my questions. One being how a partial withdraw works. They don't do it by funds desired to transfer but rather by amount and they proportionally take from each fund. Dumb.

Anyway, thanks for looking.
So just rebalance to what you want after the withdrawal. No biggie.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

User avatar
LinusP
Posts: 179
Joined: Fri May 18, 2018 10:29 am

Re: TSP in Retirement

Post by LinusP » Thu Mar 14, 2019 3:49 pm

White Coat Investor wrote:
Thu Mar 14, 2019 3:41 pm
Bonehead3 wrote:
Sat Mar 09, 2019 8:48 pm
Other thoughts on TSP after reviewing the website. They make an attempt to keep people in the TSP with some stupid videos. I called to clear up some things and thought I was talking with the worst CSR ever. She could have cared less if she answered my questions. One being how a partial withdraw works. They don't do it by funds desired to transfer but rather by amount and they proportionally take from each fund. Dumb.
So just rebalance to what you want after the withdrawal. No biggie.
I think Bonehead3 meant Roth vs. Traditional. I believe the new withdrawal options will be implemented by this November, at which point participants will be able to specify Roth vs. Traditional for withdrawals. I don't think the FRTIB has seriously considered allowing in-plan Roth conversions yet - though I hope they do sometime in the decade or so, so I can effect some before retirement.

chemocean
Posts: 114
Joined: Mon Dec 19, 2016 9:45 pm

Re: TSP in Retirement

Post by chemocean » Thu Mar 14, 2019 4:59 pm

Thank Hobby for noting the distinction of options for between the original owner and spousal beneficiaries as it relates to transfer to inherited IRAs, The inability for the spousal TSP to transfer directly to an inherited IRA for the children ia s REAL DRAWBACK.
As far as using a Trust for other reasons than avoiding probate, you need to read the Keen article in the NARFE magazine. Anyone is TSP should be a member of NARFE to understand their benefits. As the White Coast Investor know, tomorrow is MATCH DAY. A OB Gyn DR or a Family Practice doctor with a OB Gyn certificate needs asset protection by having the inherited IRA in a trust.

User avatar
White Coat Investor
Posts: 14269
Joined: Fri Mar 02, 2007 9:11 pm
Location: Greatest Snow On Earth

Re: TSP in Retirement

Post by White Coat Investor » Fri Mar 15, 2019 9:46 pm

LinusP wrote:
Thu Mar 14, 2019 3:49 pm
White Coat Investor wrote:
Thu Mar 14, 2019 3:41 pm
Bonehead3 wrote:
Sat Mar 09, 2019 8:48 pm
Other thoughts on TSP after reviewing the website. They make an attempt to keep people in the TSP with some stupid videos. I called to clear up some things and thought I was talking with the worst CSR ever. She could have cared less if she answered my questions. One being how a partial withdraw works. They don't do it by funds desired to transfer but rather by amount and they proportionally take from each fund. Dumb.
So just rebalance to what you want after the withdrawal. No biggie.
I think Bonehead3 meant Roth vs. Traditional. I believe the new withdrawal options will be implemented by this November, at which point participants will be able to specify Roth vs. Traditional for withdrawals. I don't think the FRTIB has seriously considered allowing in-plan Roth conversions yet - though I hope they do sometime in the decade or so, so I can effect some before retirement.
That makes more sense.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

Post Reply