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TSP: Stay or go? (When I retire?)

| December 23, 2015
TSP ... 401(k) - Retirement

Executive Summary:  Every TSP participant’s situation is different.  Therefore, in this communication meant for a group of people, I do not provide specific advice on whether to leave ... all ... some ...  or ... none ... of your retirement plan money in your TSP account when you leave Federal Service.  If you consult me individually, that would change!

Please note … this is a very complex topic.  This is not meant to be a comprehensive treatment of this subject.  It is simply my professional opinion and meant to stimulate your thinking.

I recently sought some medical advice about whether or not to have a diagnostic test done on some blood that will be drawn anyway … for other diagnostic tests.  (So, no additional inconvenience or pain for me just to have this one test … or even show up at the lab.)  It turns out that there might be some legitimate differences of professional medical opinion on whether to have the particular test.  Other than my own MD, other people were reluctant to provide me specific advice … but they did provide information as well as viewpoints. Similarly here.

Also ... The TSP (Thrift Savings Plan) is a Qualified Retirement Plan for Federal Employees.  Many professionals … including me … feel it is an excellent plan … especially to accumulate a retirement nest egg while you are still working.

When anyone retires, there are decisions to make.  Some of these decisions will significantly affect the rest of your life ... your spouse or partner’s life … and perhaps other loved ones.  TSP is unique … literally One Of A Kind.  So the points made here that are meant to apply to TSP participants may … or may not … apply if you are in a different Qualified Plan … such as a 401(k) or 403(b.)

Consult professionals you trust … preferably those you do not have to educate about Federal Employees and Retirees!  Read up. Talk to TSP!

Also, please be aware that in some cases … The Rules Can Change in the Middle of the Game, so to speak.  If you withdraw 100% of your money from TSP, once that money has left TSP, perhaps TSP rules might no longer apply to you. (But not impossible!)  If you keep all or some money in the TSP during your retirement, please be vigilant about TSP rule changes that might apply to you. 

Lump Sum … Monthly payments … Third Option
After you retire, there are 3 fundamental ways you may take money out of the TSP ...

  1. Lump Sum
  2. Monthly payments
  3. Third Option
    (The third option is beyond the scope of this article ... so I’m not even calling it the Third Option instead of what TSP calls it.  Please stay tuned when or if I write about the Third Option!)

    and … a combination of the above 3.

Here’s a link to a brochure published by TSP about your choices …

Are TSP Investment Choices in your best interest?
Like virtually all Qualified Plans, the TSP has investment choices.  If you leave money in the TSP when you leave / retire, you will have to make choose among the TSP’s available investment choices.  After you leave Federal service, you will have to determine if ... all … some … or none of the available TSP investment choices are in your best interests.  If … (hopefully)  you use a financial professional (extra credit if experienced with Feds) … and you determine that none of the investment choices in TSP are in your best interest for any of the money that was in TSP, that might be a reason to leave TSP.

What’s Different?  The Bottom Line

  1. If the alternative(s) proposed for your TSP money is the same as what is available inside TSP … then, why do it?

  2. TSP is probably the low cost option.  So lower costs are very unlikely.

  3. If the alternative(s) proposed for your TSP money “promise” or “imply” better investment performance … please run … do not walk … the other way!

  4. If the alternative(s) proposed for your TSP money are other benefits to you that are simply not available inside TSP … study carefully … consider advantages and disadvantages … possibly consult a Financial Professional … preferably one familiar with Federal employees and retirees … and then make a well-informed decision! 

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