Did you know that you can complete most TSP transactions entirely online when you log in to My Account? There you’ll find tools and instructions to request withdrawals and distributions, designate beneficiaries, change your TSP investments, and much more.
Your TSP Distribution Options
- Partial Distribution: You can take a partial distribution even if you’re receiving TSP installment distributions. Partial distributions must be at least $1,000.
- Total Distribution: You can withdraw all of your money from your TSP account bringing your balance to $0.
- Installment Distributions: Log into your TSP Account and use the “Model Installments” option in the “Withdrawals and Distributions” section. This tool enables you to model different installments before making a decision. You can choose a fixed amount as long as it’s at least $25. Or, the TSP can compute your installments based on the IRS life expectancy tables. For complete information, download this TSP Distributions Pamphlet.
You Can Use Your TSP Funds To Buy A Life Annuity
The Thrift Savings Plan (TSP) Life Annuity is an insurance product from MetLife that provides a stream of guaranteed income for the rest of your life. However, it’s not your only option. Other private insurance companies offer different types of annuities that provide a source of lifetime income plus riders that can be customized for your needs.
Retiring With An Outstanding TSP Loan
If you enter retirement with a TSP loan, it has to be paid back within 90 days of your separation. Otherwise, the TSP will consider the outstanding balance as a taxable distribution from your account. Depending on the amount of the outstanding balance on your TSP loan, you may end up in a higher tax bracket than when you were working.
“Otherwise you can leave your funds in your TSP and continue managing your investment while accruing tax-deferred earnings.”
Required Minimum Distributions (RMDs)
When you separate from service, you’re not required to make withdrawals from your traditional TSP until you turn age 73. This is the age when Required Minimum Distributions (RMDs) from tax-deferred retirement accounts are mandatory. Otherwise, you can leave your funds in your TSP and continue managing your investment while accruing tax-deferred earnings.
Taxes On TSP Withdrawals
Typically, the TSP withholds part of the taxable portion of distributions from your traditional TSP for federal income tax. Different withholding rates and rules apply to each type of TSP payment. Remember, traditional TSP distributions are taxed as ordinary income in the year you make the withdrawal. This can bump you into a higher tax bracket.
Connect with an FRC® trained advisor to learn more about how your TSP works in retirement.
Source: https://www.tsp.gov/
