TSP Withdrawal Options After Retirement

There are three options.

  1. Single payment

  2. Monthly payments

  3. Life annuities

 

Single payment

You can withdraw your entire TSP account balance in a single payment. You may roll over to investment firms like Vanguard for more flexibility, but you will be paying more fees.Monthly payments. Two ways to do this.

  • Monthly payments computed by the TSP based on
    IRS life expectancy tables

The initial payment amount will be based on your age and your account balance Each year.

On the anniversary of the date of your first payment, the TSP will recalculate the dollar amount of your monthly payments for the next year and so on.

The recalculation will be based on your age and your account balance at the
end of the preceding year.

You have a one-time-only opportunity to switch from payments based on your life expectancy to installments in an amount that you specify

Here is the link to the calculator to find out how your monthly payments will look like.

  • A specific dollar amount every month

You will receive monthly payments in the amount that you requested until your account
balance is 0.

You have the flexibility to change your payment amount once each year.

Use the calculator to find out how much money you can you can withdraw/month and how long your savings will last.

Life annuities

Stay away from this option.  You will get guaranteed monthly payment for the rest of your life, BUT you and your beneficiaries can do way better by choosing monthly withdrawal based on life expectancy. You deserve better than this option. Run away from this opportunity.

You can use this TSP calculator to see the difference between these options on a graph.

Below is the example $ 200,000  performing at 8% growth from age 65 to 100 with different withdrawal options.  Assumed fixed payment 1500/ month.

 

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If you are getting guaranteed SS benefit and pension, then you can take bit more risk with your extra money so you can let it grow faster and give you significantly higher return.

I personally like the specific dollar amount every month option as it gives me more flexibility and power. This choice will provide me with some control how much I can withdraw should my needs change.

I like the 4% withdrawal option that other investment firms like Vanguard for a slightly higher fee but you are not restricted what to do with your money.

TSP modernization bill is passed that might give us more flexibility with withdrawals, but the fees might go up…..We don’t have a clear picture of new TSP options yet.

The only reason to keep the money in TSP is the lower Expense ratio than any other firms.

 

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