Federal Employee's CSRS & FERS Federal Civil Service Retirement
& Financial Planning Resources
TSP Considerations Menu
CONSIDERATIONS
If you don't need the cash in your account or an immediate TSP annuity to
make ends meet when you retire, you can leave your account active. However, you
must withdraw your entire balance (or begin receiving monthly payments from the
TSP or from the TSP annuity vendor) by April 1 of the year following the year
you turn 70½ (or following the year you separate, if you are already over age
70½ when you leave Federal service).
Many opt to maintain their account with the TSP because of the fund's
attractive earnings and very low administrative fees. The administrative fees
are often half or less of what most private sector funds charge to maintain your
accounts. Another significant advantage is that the G Fund has no market
risk. Therefore, unlike most private sector funds, you don't have to
worry about fund price fluctuations with the Government Bond Fund. The G Fund's
10 year compounded historical yield is 4.92%. An excellent yield by any
standard. You still have market risks with the remaining funds, however their
yields can be attractive in advancing markets. You have a number of
withdrawal options and they are listed below.
The Thrift Savings Plan for CSRS employees provides an
additional source of retirement income. Uncle Sam doesn't match your
contributions like they do for FERS employees, however you are able to defer
taxes on your account contributions and earnings.
The TSP for FERS employees is just one of the three parts of
your total retirement package, along with Social Security and the Basic FERS
Annuity. TSP Participation doesn't change Social Security benefits or your FERS
Basic Annuity. The TSP is especially important to FERS employees because the
formula used to compute your FERS Basic Annuity is less generous than the
formula used to compute the CSRS annuity.
The TSP provides several ways to withdraw your
savings:
- You can make a partial withdrawal of your account in a single payment.
- You can make a full withdrawal of your account by any one, or any
combination, of the following methods:
- A single payment
- A series of monthly payments
- A life annuity
- Personal Summary of Benefits Including a TSP
Options Review - Before withdrawing funds or converting your TSP to a
life annuity through the THRIFT government option, consider your options.
A combination of any of the above three full withdrawal options is called a
"mixed withdrawal."
You can have the TSP transfer all or part of any single payment or, in some
cases, a series of monthly payments, to a traditional IRA or eligible employer
plan by completing the
TSP 70
form. Payments to you can be deposited directly into your checking or savings
account by means of electronic funds transfer (EFT).
An in-service withdrawal is a withdrawal you make from your TSP account
while you are still actively employed in Federal civilian service or the
uniformed services. There are two types of in-service withdrawals: financial
hardship withdrawals and age-based withdrawals. Before making an in-service
withdrawal, keep in mind that the Thrift Savings Plan (TSP) is a retirement
savings and investment plan. It was designed to help you save for your
future. If you are covered by the Federal Employees’ Retirement System
(FERS), the TSP is a critical component of your Federal retirement benefits
and may represent a significant part of your retirement income. Before you
decide to withdraw your account while you are still employed, carefully
consider not only the impact of your decision on your immediate need, but
also its impact on your future well-being.
Participants who are age 59 ½ or older and still employed by the Federal
Government can use
TSP 75 form to request a withdrawal of $1,000 or more from their TSP
accounts. You can make only one age-based in-service withdrawal. Also, if
you make an age-based in-service withdrawal, you will not be able to make a
partial withdrawal after you leave Federal service.
Use the
TSP 75 form to request a one-time-only age-based in-service
withdrawal of all or a portion of your vested account balance. You
must be a TSP participant age 59½ or older and currently employed by the
Federal Government to request an agebased withdrawal. Before completing this
form, read the following information:
Caution: The TSP only permits an
in-service age-based transfer of all or a portion of your age-based
withdrawal directly to a traditional IRA, eligible employer plan, or
Roth IRA. You can only transfer
to one account as mentioned above, not to multiple accounts.
If you wish to transfer your withdrawal to more than one account you will
have to transfer it a traditional IRA, eligible employer plan, or Roth IRA
using the TSP-75 form and then have the fund that you transferred your
account to transfer a portion of what they received from the TSP to your
other desired accounts. YOU MUST CONFIRM that the receiving
fund will allow additional transfers. The employee will still be enrolled in
the TSP
Here is a viable plan for retiring mortgage free or to simply increase
your savings dramatically. The TSP recently reported their 2011 Thrift
Savings Plan (TSP) contribution limits. The limits will be unchanged for
2011 and remain at $16,500 and an additional $5,500 for the catch-up
contributions for anyone over 50. Employees approaching retirement over age
50 should try to max out their contributions if possible to improve their
retirement savings. This is especially important for CSRS employees that
don’t receive an employer match.
Most will have to learn to live on less in retirement, a fact of life
these days. And one way to become accustomed to less income is to start
putting away more when you are still working into your
TSP account. Starting
about ten years prior to retirement I saved all annual pay increases by
increasing my allotment to the TSP, Credit Union,
and through savings bond deductions. When I retired, my take home pay was
the same amount it was in 1995, ten years before I retired. When I turned
age 50 I contributed the maximum allowed at the time to my TSP through
catch-up contributions and when I did retire my monthly annuity check was
larger than what I was taking home when I was working full time. The bonus
was that I had a lot more savings because of how I invested my TSP and saved
my annual pay increases. I actually started this process much earlier.
Around 1990 I started putting away half of my annual pay increase so I
worked my way slowing into the process.
The additional catch-up contributions will help you become accustom to
working with less income. Most will earn less in retirement and this action
can help you in other ways as well. An employee could pay off their mortgage
by applying their annual pay increases to the mortgage and retire mortgage
free or have enough additional money in their Thrift Plan that at retirement
they could take out a one-time withdrawal and pay off their mortgage.
Planning
is the key and when you learn to live on less and the money is
out-of-sight and out-of-mind you won’t miss it.
This is a principle we should all teach to our children as well. Too
often too many spend all or most of what they earn and put little thought
into how to save and economize. For example, even without a COLA in 2010 and
2011, you can save by shopping at stores like ALDIs, a grocery box store
with exceptionally low prices. To locate an
ALDIs near you use their store locator to find one in your area.
Their produce is half the price of what you would pay in a regular grocery
store and we shop their often. Save-a-Lot is another discount grocery
to consider. Visit Save-a-Lot's web site
and type in your zip code to find a store in your location. Here are other
ways to economize:
- Consolidate services such as phone, cable TV, and
internet. Verizon, Comcast and DISH Network all have bundles available
for as little as $79 a month. I saved over $160 a month when I bundled
all of my services with Comcast recently and locked up the price for 2
years with no contract.
-
See Winning Rental Car bids in Top Cities from $12/day!
- Review all of your bills and services to see what can be
canceled or at least paired down a bit to save monthly fees. I
subscribe to several services and when I received annual bills for
services I subscribe to I call for discounts or to cancel if the costs
are too high. They often offer discounts of up to 50% or offer free add
on services if you sign up for another year. You will be surprised just
how much you can save going through this exercise each year.
- Look for discounts
- Ikea Stores in our area offers a 99 cent
breakfast with free coffee at their restaurants if you arrive before
10 am. They open the restaurant at 9:30 am each morning, a half hour
before the store officially opens.
-
Click here to SAVE on Dining!
- ALWAYS ask for a discount, AAA, AARP, Senior and you will be
surprised at how many are offered. I discovered this by accident at
Super K one day when the store clerk said that he gave me a senior
discount. When I asked why he said that Tuesdays were senior
discounts days and I must have looked the part.
-
Name Your Own Price & Save up to 60% OFF Hotels!
-
Get a Quote Now. Save an average of $469 on auto insurance with Travelers.
- When CDs Come Due Earn Higher
Yields
- Saving Grace, Fear of the
Unknown, and Keys to a Long Life, article by Dennis Damp
- Make your own coffee, buy premium coffee at Sam's or Cosco and not
at the high priced coffee shops. A financial planner recently
reported that if you put the cost of a daily Starbucks coffee away for
40 years you would be a millionaire.
- Cut coupons, many stores offer double coupon value up to 99 cents in
our area.
- Comparison shop, always obtain multiple quotes for repairs and
services. You will be astounded at the price differences and then check
out the vendor on the www.bbb.org site
to make sure they are reputable.
- Visit www.amazon.com to
price big ticket items you are considering. If the cost of the item
is $25 or higher shipping is free and you currently pay no sales tax.
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