After you retire, you will face many different choices regarding your retirement benefits. One of these choices will involve your money that has accumulated in the Thrift Savings Plan: Should you keep your money in the TSP, or withdraw it and invest it some other way?
Unfortunately, there is not a single answer that always works perfectly for everyone. Before we can answer that question, you should ask yourself two more.
Do you want easy access to your money in retirement?
During your career, the Thrift Savings Plan provided you with an easy way to save money for retirement. Once you’re retired, it’s an entirely different ballgame. The TSP offers only one method of withdrawal in retirement, through automatic monthly distributions. That might not be very convenient for you, because you can only make changes to your distributions once per year, during a limited period in the fall, and you can only make changes for the following year. You also cannot take money out of your TSP to cover a large unexpected expense.
There are many other ways in which keeping your money in the TSP can be inconvenient. But the bottom line is that if you want regular monthly distributions and you’re okay with the other inconveniences, it’s still okay to keep your money there.
What type of investment options do you want to access?
Let’s say you want to purchase an annuity, but need cash for the lump-sum payment. If you have performed the calculations, weighed the benefits, and have decided that this is the right path for you, then you might wish to pull the money from your TSP at retirement. Or, you might wish to invest that money in some other way that suits you; the stock market, real estate, or even starting your own business. We can’t attest to the solidity of these plans, only that there are reasons you might not want to leave your money in the TSP.
One final thing to consider: Who is your beneficiary? If you decide to leave your money in the TSP, your spouse can also do that after your death. However, non-spouse beneficiaries must withdraw all of the money upon inheriting your account. That could trigger serious tax problems (and loss of some funds) for your beneficiary, so this is an issue to consider carefully.
For more information about your Thrift Savings Plan or retirement in general, call our office to schedule an appointment. We specialize in guiding federal employees through these difficult decisions.
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