What the Smartest Feds Do with Their TSP at Retirement

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[@David-cv3bp]

The tsp was not meant to be day trader fund. Very few Federal employee retirees are knowledgeable enough to put money into a fund where they need to know how to trade, THIS IS WHAT MAKES THE TSP GREAT!

[@EatLeadPal]

I'm 63 and retired last year. I have a friend who spent the last 20 years of his career in CS. He kept all of his TSP in the G fund and retired with very little over what he contributed. I spent the last 16 years of my career in CS and kept my money in the C and S funds. The amount I ended with is far above what my friend ended with. I'm now in the process of moving my money slowly to an outside account so I can do Roth Conversions. If TSP allowed these, I would keep my money right where it is.

[@JeanetteKnight-t8b]

How much can you convert to a Roth each year?

[@Kevin-jf5bw]

i would venture 25% of federal employees are majority G throughout their working years. comically believe they are being risk adverse. instead they are taking far more risk than C/S because they struggle to keep pace with inflation. had this conversation numerous times at my alphabet agency and coworkers get angry and defensive. i consider the pension my fixed income investments so I've been comfortable 90%+ equities. 401k well over $2M and walking away from .gov this year...

[@juliannetaylor9989]

I'm getting ready to start conversions. Really wish we could keep in tsp.

[@EatLeadPal]

@@JeanetteKnight-t8b As much as you want but you will have to pay the taxes on it. It will add to your income so you have to be careful about going into a higher tax bracket.

[@itguru2037]

@@Kevin-jf5bware you planning on using the pension funds for investments ?

[@itguru2037]

The smartest listen to this man

[@jerrys2346]

One of the best parts about federal retirement is the guaranteed pension income allows you to be more aggressive with investing TSP. I've never agreed with the idea of getting super conservative at the point you retire. That limits your upside way too much.

[@1Mannco]

Pension, S.S., 2 yr emergency fund, out of debt = G Fund/bond fund?...the rest of investments in C Fund/stocks?

[@jerrys2346]

@@1Mannco That's the way I look at it. Between pension and Social Security, the conservative side is covered (I like your idea of a cash reserve and debt free too). At that point, everything invested can be in C or S to allow for stock market gains that got me where I am.

[@Milkman3572000]

My Dad survived the Great Depression.. #1 Lesson, live within your means ( modest) #2 dont put all your eggs in one basket. Dont 100% rely on the tsp or the government. Having multiple income streams. #3, Garden. Healthy food is so much tastier

[@dale9484]

Hi Mr. Haws -- Can you go over approximately what percent of TSP funds should be kept in the G Fund and what percent in the C fund at retirement?

[@PlanYourFederalBenefits]

Great question. It totally depends on your situation. Feel free to see some of my videos on this: hawsfederaladvisors.com/tsp-investing-articles/ Or schedule a meeting with us here: app.hawsfederaladvisors.com/whatservicemakessense

[@zenawarrior7442]

This was amazing. Thanks!!📈🎈😊

[@13kingofbattle47]

Thank you homie

[@larriveeman]

fortunately I've been retired for 2 years, my pension (larger) and the wife's pension(smaller) covers all expenses, wife took SS at 63.8 I won't take SS until FRA or later, don't need TSP/IRA except converting to roth I moved most of my TSP to an IRA before I retired.

[@Jonesmatsunaga]

It's a big deal, for sure. I've been looking into it too. I mean, the TSP is great, but it's not exactly the stock market.

[@Colbe-lx7fb]

Yeah, I heard a rumor that the smartest feds are converting their TSP into a Roth IRA. Something about tax benefits and more flexibility.

[@glasshalffull2930]

There’s a reason the S&P500 is the measure with which investments are gauged.

[@asandrik3124]

Thank you

[@brianturner7134]

Can/should you recalculate each year for the 4%? Say I take out 20,000 but gain 40,000 in a year , can I recalculate the 4 % based on the new amount I have? Same when the market goes down. If i take out 20,000 and lose 40,000 , should I recalculate the 4% again? Thanks

[@PlanYourFederalBenefits]

Great question. Yes, the 4% rule is based on the amount of money you have in your account each year.

[@stephendibari5010]

The last I heard/read when you withdraw from the TSP you cant designate which account to pull from. ex. If after I retire and I'm split 60% C and 40% G and I withdraw $3k per month, 60% will be taken out from the C fund and 40% from the G fund. If I want to pull 4% only from the G fund as per your example in this video, how is this possible? I know you can move $ out of the TSP into an IRA which has more flexibility so you can choose which buckets to pull $ from, But id rather avoid this if possible.

[@BC-te9ow]

Unfortunately not yet possible. Hopefully this will be another improvement made to TSP.

[@stephendibari5010]

@@BC-te9ow my plan is to retire at end of 2028, hopefully this change will happen by then ! I mean what is the point of his video if you can’t currently implement it within the TSP?

[@GracieValenti1]

It can only be done by rebalancing the $ in each funds whenever you withdraw to simulate taking it from one fund or the other. Because you are correct, currently you cannot specify which fund you want your withdrawal from.

[@stephendibari5010]

@@GracieValenti1 I was thinking that too. That would require a balance shift every month. Definitely not the best option

[@susanb7548]

This has been my thought also, even to rebalance is like taking the money out when the market is down. What am I missing in this. Love saving in the TSP but I’m thinking of moving the safe money out to brokerage.

[@AKBRONCOSFAN007]

Annuities are hot garbage. In retirement we SHOULD be debt free with no mortgage. That said, a federal pension, SS and TSP income should be more than enough to sustain ourselves in retirement. BTW, that’s not counting what the spouse is bringing to the table. I’m going 100% G Fund once I’m retired.

[@glasshalffull2930]

If you only have a few hundred thousands, then G Fund certainly would be an option, But if you’ve got a few million dollars, then it would be a shame to lose out on hundreds of thousands (or millions) in gain.

[@1Mannco]

@@glasshalffull2930 Right and lose money to inflation being 100% G Fund when retired...Maybe 40%-50% G Fund even w/a few $100K...Remember WITH the pension, S.S., 2 yr emergency fund, dividends from investments at Fidelity/Vanguard, being out of debt plus 'living within your means' = G Fund right there!!

[@glasshalffull2930]

@@1Mannco Everyone’s situation is different and the problem for those with only a few $100K in the TSP is they cannot risk too much in the C,S,I funds because of the volatility as they near retirement. Personally, if I were in that situation, I would be almost all in the F Fund.

[@b.dailey3180]

If you only have a few 100 thousand & you can tolerate some risk then put 60% in C, F, & I & 40% in G. Work part time, stay fit, start a business, take classes, etc. Thankful for these videos & commentators!

[@boatlover1875]

Foolish not to roll this over the day you retire into an IRA where you can control your funds real time and get lower feel. Vanguard or Fidelity for example. No trading limits. G fund type holdings even earn better rates. You could trade the C fund equivalents several times a day if you wanted, not twice a month and also in real time, not tomorrow's price. Sorry, but this guy is not your advisor.

[@David-cv3bp]

Haws is giving overall examples, if you want a personal advisor then you pay. As for taking your money out totally, only a fool does that. If you retire before age 59.6 with immediate pension there is no early withdrawal penalty. Try that in civilian sector

[@glasshalffull2930]

One major issue is an IRA is NOT protected from lawsuits.

[@Yette]

The reason to move to an IRA is the potential to lower fees. Fidelity & Vanguard have dozens of investments with significantly lower expense ratios compared to TSP funds. Reducing from 0.55 to 0.15 adds up quickly over time.

[@pattyk8594]

I would never buy an annuity, it just does not make sense to buy one. Great video, thank you!

[@Kevin-jf5bw]

pensions often allow at least a partial lump sum. if the employee takes the pension=annuity.

[@GracieValenti1]

I've been retired for two years and along with my pension a 4% withdrawal from TSP has allowed me to keep about 85% of my pre-retirement income. TSP invested in C/S 80% and G 20%. I currently have more in TSP than the day I retired. I did have to up the amount of withdrawal as things have gotten so expensive lately. Hoping to wait until 70 to take SS as have fairly long lives in my family. Hope this strategy will work for the long term. Fingers crossed.

[@Laura-nx4dm]

Take SS now. Especially if your genetics indicates a longer life. The math doesn't work for waiting.

[@boatlover1875]

Great job. Understand, you couldn't have retired at a better time to make that calculation work so well. This works great when the market is rocking! Move that money to an IRA in a brokerage like Fidelity or Vanguard. You'll save money and have more flexibility. You'll likely also save on rates for the same funds.

[@itguru2037]

Are you still C/S 80 and G 20 in retirement?

[@boatlover1875]

@@itguru2037 More or less, maybe 70/30 currently. It changes. A few weeks ago, took some "C" profits and put them in the "G" fund which in my brokerage pays about 1% more than TSP currently. Most of my "G" fund securities are in VOO which also has a lower cost than the TSP fund and is essentially the same. The real advantage is you can trade real time when the market is open. You can also trade specific stocks if you choose or your advisor can if that is how you are comfortable.

[@GracieValenti1]

@@itguru2037 yes

[@jamesvaughn5320]

Really like this video. Like to see video expanding on these concepts. An investment strategy I was thinking, using your easy math. Balance $2M, take $1M or similar and place in F fund for living expenses and place $1M in C fund. If there is down year move money into C fund for potentially recovery growth. I would use this strategy first 10 years of retirement.

[@wallys7016]

So what if you’re only taking 4% isn’t that the idea and premise behind that rule? I mean the average return is 10% in the S&P and if you only take 4-5 % you should be good.

[@jessemarkle5413]

A million in tsp, funny. Bop never taught us crap. I've got 24 years in and eligible to retire once I'm 50. Be lucky to have a little in tsp. Wow. People must have put their whole checks away and eat Ramen all the time to have a big tsp. Thanks for your videos though.

[@b.dailey3180]

Start early, consistently try to max out contribution as much as possible, strategize your funds, work a second job, live below your means and you CAN be set for life or TSP millionaire.

[@stuartdavis83]

Compound interest is the 8th wonder of the world and most people do not understand it....

[@markmurrell1894]

First thing I think I will do at retirement is move the tsp to an Ira. So many more choices for investments and you can actually build more “buckets” of money.

[@charlietuna1971]

Maybe not the best option for everyone, especially Special Provision Employees.

[@Fedupgarbageguy]

For me, I will also move the TSP to an IRA, but not because of financial flexibility. The rules aren't quite crystal clear, but when both my spouse and I pass, the non-spousal beneficiaries, i.e., kids, only have 90 days to make a decision on what to do with the money. I have not found what begins this 90 day countdown, but if the kids don't tell TSP, then TSP will distribute the balance in a lump sum, subject to the highest tax bracket. I don't think my kids will realize that they need to do this ASAP... This is more of an emotional decision, but I'd hate for the government to take 37 or 39% for taxes because my kids will have busy lives of their own....

[@charlietuna1971]

@markmurrell1894 if you retire before 59.5 years, you may not want to move it all to an IRA where it then becomes inaccessible.

[@b.coxemba6799]

I retired August 2021 age 51. Never touched my TSP. I have more money now than when I retired. The past 3 years I been living off my DOJ pension and veteran compensation. I been saving money. Once I turn 62 I'll start making withdrawal every December 15 if the end of the market performance is up. This money will be included in the following year budget or short term bucket. I'll take social security at 62. Never touching my principle.

[@ricardobooker1704]

I like your procedure. My question is where did you place your funds , which funds and how much. I would like to do this but don't know what funds to choose.

[@b.coxemba6799]

@@ricardobooker1704 Unfortunately the government puts you into the G fund starting. I immediately switched to the far away or what I consider the most risky life cycle fund. Frame of mind Set it and forget it. In retirement I never moved my investments. I'm not afraid of risk. TSP seems to be less risky than any private sector 401k I examined with lower cost. Knowing what I know now - I stick to C,S,I funds. Early in my career just build out my C fund. I still did well. Day one I started with 10%, three months later 15%, by 15 months change to maximum contributions. This is hard for many people. I was a super saver. All of my veteran compensation went towards cash reserves. Once I built my emergency funds, I purchased savings bonds. My first 2 years I built my leave time. Only used sick leave. So I kept 240 hours. Than I built sick time. Day one I also started the military buy back process. Took a year to get documents. I WROTE a check for the full amount.

[@b.coxemba6799]

@@ricardobooker1704 I picked the L fund with the longest matured date. Look back I probably run with C,S, and I. Mostly C funds index. Compared to private sector their still relatively low risk. I'm still in L2050.

[@glasshalffull2930]

Just be careful that you may have huge RMDs when you are in your 70s that may push a good portion of your income into the 32% tax bracket. You should really consult a tax advisor.

[@b.coxemba6799]

@@glasshalffull2930 Believe me when I say, there no way my taxable income will reach 32%, My job was a financial consultant for Department of Justice and I own a financial management company. Hint: 1099. I fall into age 75 for mandatory withdrawals. I'm 54 now. Unfortunately my family members life expectancy history is less than average. I earned a Executive MBA (EMBA) in finance and accounting. Like I said I'll be taking withdrawal in December.

[@kckuc310]

Yep, that’s one of the issues with TSP withdrawals. I plan on moving all the monies out. Even if I just left in g fund some monies, the g fund pays less then vanguards cash reserves.

[@ofari]

Why not move the funds to then index

[@bleebu5448]

Retired over a year agp (1 year, 2 months) haven't touched my TSP, or other IRAs, yet. Pensions rock.

[@marycolmenar1633]

How does the investment buckets (short and long term) work with the 4% rule?

[@PlanYourFederalBenefits]

Great question. Feel free to schedule a meeting with us to learn how to implement it: app.hawsfederaladvisors.com/whatservicemakessense

[@deangrisham2858]

Hello, I plan on rolling over my Roth TSP to a SCHWAB Roth after retirement. I have never deposited any funds to the Schwab Roth to date. Will the 5 year penalty clock for a Roth deposit start again when the rollover happens?

[@PlanYourFederalBenefits]

Great question. Here is a great video about that: kzbin.info/www/bejne/kKOre5pjmMR4oZo&pp=ygUYaGF3cyBmZWRlcmFsIDUgeWVhciBydWxl

[@richardt8278]

When making withdrawals, can you choose how to take $ out of TSP Roth vs. TSP (G/C fund). Would the Roth be in the Short Term bucket vs long term?

[@PlanYourFederalBenefits]

Great questions. In this training, we go over that if you would like to see it: kzbin.info/www/bejne/qqmxdJWodrJmmpo&pp=ygUaaGF3cyBmZWRlcmFsIGFkdmlzb3JzIGxpdmU%3D

[@alenacabangon4866]

How about if i open and put some of my money in a fixed income annuity ? Is it advisable.. or not?

[@PlanYourFederalBenefits]

On rare occasions. Feel free to check out some videos about this: kzbin.info/www/bejne/oZLclp-FmN2hsMk&pp=ygUUaGF3cyBmZWRlcmFsIGFubnVpdHk%3D kzbin.info/www/bejne/lZeZoXdrmsh3r8U&pp=ygUUaGF3cyBmZWRlcmFsIGFubnVpdHk%3D Or schedule an appointment with us here: app.hawsfederaladvisors.com/whatservicemakessense

[@Steve-yl1yg]

Great video except if you have "buckets" in TSP your not allowed currently to decide which "bucket/fund" to withdraw from--only a percentage from each. Point being, if you have 40% G for security reasons and need money during a downturn, the TSP is going to pull from all your "buckets" so a bucket strategy is really not a strategy in TSP. Who knows maybe someday we can pick and choose with fund to pull from--I'm ~ 3 yrs out from retirement and really don't see any advantage moving money into IRA's, Roth account (5 year rule applies), etc., your going to get taxed either way and for most is it really an advantage to transfer funds? I'm thinking no.

[@Janus-27]

This is exactly what I was thinking. Could you please address this specific issue in a video? You would think that the TSP would have resolved this by now. People should be able to sell shares of a specific fund, for the main reason that you mentioned, not selling shares of the C, S, and I funds in a down market when you can instead pull money from a relatively flat G fund bucket. Thanks

[@danwells5545]

There is no reason you can't rebalance right after you make the withdrawal. Just move the money back into your hypothetical bucket from wherever it came out of.

[@Janus-27]

@danwells5545 I still don't see how this solves anything. If you sold in a down market and a fund went from $10 to $5, you would have to sell twice as many shares to withdraw the amount you want. That is why I would use cash or the G fund in down markets. You have to sell more shares to achieve the same amount when you should just be able to sell relatively flat G shares. Of course you can move money from G to C, but you still sold those at a loss. Tell me what I am missing.

[@danwells5545]

@@Janus-27 If you move money from G to C when the market is down, you're not selling at a loss (the G fund didn't lose anything), you're buying at a bargain.

[@davezombie1215]

Lots of people transfer out their funds to an outside IRA because you can choose the fund to withdraw and you DONT need a spouse approval unlike the TSP. In addition, god forbid you and spouse perish in the same time or close , your kids or beneficiaries will have to pull out all the money from TSP! So the TSP is great for investing while working but is not a good place for withdrawal of funds. 12:38

[@jivefive99]

Dont forget one advantage of the annuity is your money cant be stolen by someone conning you or busting into your TSP and taking all of it. Once you give the money to the insurance company, you can be VERY sure they will only pay out exactly what you agreed to get each month, and thats it. Your principal cant be robbed and is secure -- youve lost some flexibility, but for some, the peace of mind is worth it.

[@striperseeker]

Can you tell TSP from where you want the withdraw? Can I tell them I want my RMD or voluntary withdraw from G-fund?

[@PlanYourFederalBenefits]

Great question. No, you cannot select which funds to withdraw from. It will distribute your funds in a pro rata form.

[@striperseeker]

@@PlanYourFederalBenefits So I would have to put more in my "secure" investment fund (i.e., G-Fund) than I need because it will still pull from the others, making your example moot.

[@suea.575]

What if rmd is less than 4%?

[@PlanYourFederalBenefits]

Great question. Here is a great video on RMDs: kzbin.info/www/bejne/rJDWc6qZf55nq6s&pp=ygUQaGF3cyBmZWRlcmFsIHJtZA%3D%3D

[@nicholasrunowich371]

How does a TSP annuity and its payouts play into MAGI for Medicare Part B purposes ? The goal is to pay out the minimum for the Medicare part B premium - so you need to keep your MAGI below certain two year look backs. I never thought about TSP annuities - but doing some Time Value Money math - looking at "net ratio" (formula for interest rate and inflation rate) might be worth looking into. Also, RMDs , how many people mess that up , paying then into the next tax brackets and even worse jumping a Medicare part B premium because of MAGI on the RMD . Since TSP doesn't have roth conversations - so you have to worry about moving all your money over time to an IRA roth - lots and lots of headaches over your lifetime -- so maybe , just maybe this TSP annunity isn't as bad as it seems. The monthly payout never changes for life - so hence the Time Value of Money equations come into play to see if it is a "good deal". What does everyone think of my ideas ? Dallen ??

[@franktallent5728]

If the market is down when you take the RMD just put it into Fidelity or Vanguard S+P account.