All investments are subject to risk, including the potential loss of principal. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). is an independent financial services firm that utilizes a variety of investment and insurance products. Kim Franke-Folstad contributed to this article. Look for independent financial professionals who are knowledgeable in TSPs, and work together to build a retirement financial plan that’s based upon your specific needs, wants, and goals. How much will you need to have saved for a comfortable retirement? Will your TSP fund choices, and your contribution percentage, get you to that goal? They can help you evaluate your TSP choices within the context of a holistic, tailored retirement plan.
Rather than just enrolling in the TSP and turning off your brain, find qualified professionals - even if it's just for one meeting, because you don’t know what you don’t know.
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Often, when federal employees enroll in the TSP, it’s done without thinking about how the TSP will complement (or complicate) other retirement accounts and retirement income sources, such as Social Security benefits, pensions, IRAs, 401(k)s, 403(b)s, Deferred Comp, non-qualified accounts, bank accounts, etc.Įnrolling in the TSP is great, but don’t just enroll in it and settle for the “default settings.” Meet with a retirement financial planner and qualified tax professional to see what forward-looking tax planning and advanced retirement income planning options might be in your best interests. You don’t have a clear strategy for your TSP The fourth option may be a good choice for you if you’d like broader - and possibly better - options than just the five funds that are available to you in your TSP, and if advanced income planning, asset allocation, investment management, forward-looking tax planning, health care planning and legacy planning are important to you.Ĩ. If you’re going to consider a life annuity for retirement income, I recommend you meet with an independent retirement financial planner and have them see if the TSP’s life annuity is your best option. This is kind of like when I was in Navy boot camp and they told me the exact underwear I was going to wear for the next two months. The third option gives the TSP the job of purchasing a life annuity for you. Consider meeting with an independent retirement financial planner so that you can at least consider other income options that may work better for you. The second option is likely too simplistic for most separated federal employees, and likely won’t work as well as other retirement income options. The first option listed above - withdrawing all your money as a lump sum - exposes 100% of your Traditional TSP balance to federal income taxes (and possibly state income taxes) in one tax year. Work with a financial adviser to perform a rollover to a Traditional IRA and/or Roth IRA, and for advanced income planning, asset allocation, investment management, forward-looking tax planning, health care planning and legacy planning.Have the TSP purchase a life annuity for you.Withdraw the money in equal monthly payments based on the dollar amount or actuarial tables.Withdraw all of the money as a taxable lump sum.
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When you leave federal employment, you have a few choices for how to take the money from your retirement account. You don’t understand all of your withdrawal options Most financial advisers will offer you a complimentary appointment.ħ. If you’re using TSP Lifecycle funds, please “seek professional help,” and meet with a financial adviser to make sure you’re on course. Lifecycle funds make the assumption that all federal employees who plan to retire in the same year have the same risk tolerance. Autopilot without a pilot is dangerous, not safe. But you still need a pilot for a safe landing. Many federal employees have chosen a Lifecycle fund because it sounded like “autopilot.” When you fly on an airplane, the middle of your flight is set to autopilot. TSP Lifecycle funds are made up of a combination of all five TSP funds, and they automatically shift to a more conservative asset allocation as you approach your planned retirement date. They’re based on the idea that younger federal employees can handle more risk than federal employees who are closer to retirement. Lifecycle funds take a retirement “target date” approach to investing. You assume a Lifecycle Fund is the right fit
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