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Should I Move My Money Out of the TSP Once I Retire?
The Thrift Savings Plan (TSP) is a retirement savings and investment plan for federal employees and members of the uniformed services. It offers a range of investment options and tax advantages that make it an attractive tool for building a nest egg for retirement. However, once you retire, many individuals often wonder if they should move their money out of the TSP and explore other investment options. This article aims to shed light on whether this is a wise decision or not.
One of the primary reasons individuals consider moving their money out of the TSP after retirement is to have more control over their investments. The TSP offers a limited number of investment options, and retirees may feel that they have different risk tolerance or investment goals that can be better achieved elsewhere. By moving their money out of the TSP, retirees gain the flexibility to invest in a wider range of assets and make more customized investment decisions.
On the other hand, there are several reasons why moving money out of the TSP may not be the best choice for retirees. Firstly, the TSP charges incredibly low fees compared to many other investment vehicles. This can significantly impact the growth of your retirement savings over time. Additionally, the TSP’s investment options are well-diversified and have historically provided favorable returns. By staying in the TSP, retirees benefit from the plan’s strong track record and avoid the potential pitfalls of other investment options.
Moreover, the TSP offers a unique option known as the TSP annuity, which can provide a steady stream of income throughout retirement. This annuity is a guaranteed monthly payment that lasts for the lifetime of the retiree or their beneficiary. By choosing the annuity option, retirees eliminate the risk of outliving their retirement savings and enjoy peace of mind during their golden years.
It is important to note that moving money out of the TSP may also come with tax consequences. If the money is transferred to an individual retirement account (IRA) or another retirement plan, it can be done without immediate taxes. However, if the money is withdrawn from the TSP and not rolled over into another qualified account, it will be subject to tax liabilities. Retirees must carefully consider the tax implications before making any decisions about moving their money out of the TSP.
Ultimately, the decision whether to move money out of the TSP once you retire should be based on your individual circumstances, risk tolerance, and investment goals. It is advisable to consult with a financial advisor who can help you analyze the pros and cons and ensure you make an informed decision.
In conclusion, while the desire for more investment control is a plausible reason to consider moving money out of the TSP after retirement, there are several factors that make staying in the plan a compelling choice. The low fees, well-diversified investment options, and the availability of the TSP annuity make the plan an attractive vehicle for retirees. However, each person’s situation is unique, and consulting with a financial advisor is crucial in making the right decision for your retirement savings.
Thanks for the helpful video. It cemented for me the notion that I should leave my money in the TSP instead of moving it.
Is it true that if you work 10 years with the government you get $800 /month pension regardless what age you retire?
Thanks for all the help you give ❤
Despite the financial instability all over the world, I’m so excited I’ve been earning $45,000 from my $10,000 investment every 10days…
Hello, we just recently got out quarter 2 TSP account statement. Under Your Cintributions, I see line titled "Automatic 1% – 3yr", can someone please tell me what this is for and why there is a "3yr" there? Thanks in advance!!
I know you usually advise against pulling money out of the TSP to pay off a mortgage. However, I just got paid my annual leave balance and it is slightly more than what I owe on my house. I also have enough money to make it through the next few months while I wait for the retirement claim to settle. So, the question is should I pay off my house with the annual leave payment, or put the money in slightly higher interest paying CD's etc.
I will forever be indebted to you you've changed my whole life continue to preach about your name for the world to hear you've saved me from a huge financial debt with just little investment, thanks so much Mrs. Payton Brooks
Always great information. I’ll keep my tsp open and keep some money in G fund when I retire at 57 (so I can withdraw it those first couple years) but I feel the biggest reason to get out is the inflexibility of withdrawing from targeted funds (vice your allocations). Although I will be looking at Roth conversions it’s that horrible withdrawal from TSP that will motivate me to move my money. I do worry a little about the complexity and welcome thoughts on money managers or advisor options. Will definitely be using you and your firm that year before I retire but welcome your thoughts on best advisor options/advice beyond? Is that your firm?
Getting rid of RMDs on the Roth TSP was a GREAT thing!
But, from an estate planning standpoint, there’s still the issue with the account drawdown requirement from SECURE 2.0.
Don’t your beneficiaries still have to empty the account within 10 years of inheriting the account?
This isn’t an issue with an inherited Roth IRA. (At least not yet!)
If the TSP added a Roth Conversion option, I bet a lot more people would keep their money in the TSP!
If you retire before age 59.5 and you need to get money out of your retirement account, I believe it’s very important that you keep that money in your 401K!
If you roll money over to an IRA and then pull money out before 59.5, you’ll get hit with a 10% early withdrawal penalty.
I’m rolling over the majority of my TSP funds to an IRA once I retire. I have to keep enough in the TSP between age 57 and 59.5 to make withdrawals. Roth conversions will definitely be a part of my tax strategy. I’m also unmarried and the TSP doesn’t provide beneficiary accounts to non-spousal relatives, so to make things easier on my surviving relatives I’ll just name them as beneficiaries of my IRA’s.
BUT whatever you you do, DON'T pay an AUM fee to a CFP EVER!!
heck yes move most of it out, there are sooo many better investments with CD's, TBills, MYGA…. Just leave enough in the TSP so you can move back if you want something super simple, a holding account
i'd really like to know when i'll be able to put my matching funds into my roth tsp. secure act was months ago. whats taking so long?
Thanks for your efforts on this series, I love it! I moved my TSP into several IRA's so I could convert my traditional funds to Roth. It was a bit hard and clunky to move but now it's going well. I'll be 100% Roth in a few more years and considered it a must before drawing Social Security. Most Federal employees are going to get hammered with taxes in retirement. Contributing to TSP Roth instead of TSP Traditional as well as converting traditional funds (all the gov't match is traditional) can really help in a lot of cases.
What about Rule of 55? Or does 72T fulfill same purpose if you convert to IRA?
IRA let's you buy CDs at 5.5% right now no option for that on TSP. Unless of course it may be an option on the higher cost TSP options. Do you get paid dividends in the TSP if your in the C fund? Like you would get in SPY?
Thx for this info. I was just wondering about this. Hopefully will be retiring on Jan 2026
Man, must've been a big number.
I'm leaving TSP when I retire in a few months. Roth conversions is the reason.
Reference video at 1:04 – when was the requirement to get notarized spousal approval for withdrawl eliminated as you state? Thanks.
If I am still an in-service federal employee but over 59 1/2 can I roll part of my TSP over into an IRA?
I lost count how many times he said "right", right? Annoying.
I am absolutely, they eased up restrictions but still to restrictive. I want access to “my” money when I want. The biggest reason is I want Roth or traditional withdraws. TSP still thinks these are the same they are not equal and Roth conversations.