Have you thought about what you’re going to do with the balance in your Thrift Savings Plan (TSP) when you retire? Since you can no longer make contributions to your account once you separate from service, it’s important to understand your options and plan ahead.
Leave Your Money In The TSP
Leaving your money in your TSP is the easiest option. You can’t continue to make contributions however your money will continue to grow. Though the TSP limits you on investment choices the fees are lower than you’ll find elsewhere and you don’t have to start taking distributions until you turn age 72.
If you want to start taking distributions before then, you can choose monthly, quarterly or annual installment payments. Or, you can schedule a date up to six months into the future to start your installment payments and they will continue unless you stop them or until your account balance equals zero.
Rollover Your TSP Into A Qualified IRA or 401(k)
Rollovers to a qualified retirement plan can give you more control over making investment decisions. You can request a direct rollover to an IRA and avoid any income tax consequences. If you decide to take a position in the private sector after your retire, you can also roll your TSP balance into an employer’s 401(k) plan.
Keep in mind that a direct rollover means you make a request to the TSP to send your money directly to an IRA or a new employer’s plan. If you make the withdrawal yourself and then deposit the funds in an IRA or 401(k), it’s considered an indirect rollover. With an indirect rollover there are tax consequences and possible early-withdrawal penalties.
“The amount of your monthly payment is based on how much of your balance you used to buy the annuity and your age at the time of the purchase.”
Transfer Your TSP Into A Qualified Annuity
An annuity is an insurance product that you can purchase which provides a guaranteed stream of fixed income for the rest of your life. When you buy an annuity, you can transfer some or all of your TSP balance. The amount of your monthly payment is based on how much of your balance you used to buy the annuity and your age at the time of the purchase. You can choose the TSP MetLife Annuity selected by the TSP Investment Board or shop for annuities offered by other insurance carriers that may provide more flexibility and choices.
Before you make a final decision, connect with an FRC™ trained advisor who understands the ins and out of the TSP to learn more about the pros and cons of each option.
