Question: Is The TSP A Good Retirement Plan?

What is the best thing to do with your TSP when you retire?

Retirees often consider moving their TSP account to another service to take advantage of a more diverse investment mix.

Many vendors such as Fidelity and Vanguard allow participants to purchase any mutual fund, ETF, stock or bonds for their account..

Will my TSP continue to grow after I retire?

You can leave the money in your Thrift Savings Plan account until April 1st of the year after you turn 70 ½. … Pros – Your money can continue to be invested and may grow in value over time. Cons – You are limited in your investment choices – you can only invest in the specific funds in the TSP.

Can I transfer my TSP to a 401k?

General Rules. Broadly speaking, TSP accounts are subject to the same rollover rules and provisions that govern other tax-deferred retirement plans, including traditional IRAs and 401k plans. If you have an old TSP balance and you are now covered under a new employer’s 401k, you can generally roll the balance over.

How much are you taxed on TSP withdrawal?

The two most popular withdrawal methods can leave you holding the bag at tax time because the TSP did not withhold enough money. If you elect a single withdrawal (the second most popular withdrawal choice), the default withholding rate is 20%.

How do I avoid paying taxes on TSP?

If you want to avoid paying taxes on the money in your TSP account for as long as possible, do not to take any withdrawals until the IRS requires you to do so. By law, you are required to take required minimum distributions (RMDs) beginning the year you turn 72.

What states do not tax TSP withdrawals?

Alabama, Arkansas, Connecticut, Hawaii, Idaho, Illinois, Kansas, Louisiana, Maine, Massachusetts, Missouri, New Jersey, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, West Virginia and Wisconsin either don’t tax military retirement income or allow part or all of military retirement income to be …

What is the average TSP balance at retirement?

Re: Average TSP Balance at Retirement 30, the average account balance of an employee covered by the Federal Employees Retirement System was $56,494.

Do you pay taxes on TSP withdrawal?

Withdrawals of contributions are not taxed, and the earnings are only taxed if the distribution is not qualified. When a payment includes both traditional and Roth money, the tax rules for traditional balances apply to the traditional portion, and the tax rules for Roth balances apply to the Roth portion.

How many TSP millionaires are there?

45,200 TSP millionairesCurrently there are just above 45,200 TSP millionaires—out of some 5.8 million accounts, including current and retired federal and military personnel and survivors—up by 18,000 from the end of March but not yet back to the 49,600 at year-end 2019.

What is the safest fund in TSP?

The G FundThe G Fund: This fund invests in short-term US Treasury securities that are specially issued to the TSP and is the safest investment choice in the plan. There is no risk of losing principal; however, the fund offers a means of earning interest that can keep up with inflation.

What happens to my TSP if I die?

If die and you do not have a TSP-3 form filled out, your TSP account will be distributed according to the federal benefits standard order of precedence, as follows: … To the beneficiary (or beneficiaries) designated by the participant on a properly completed and filed Form TSP-3, Designation of Beneficiary.

What happens to my TSP after I retire?

After you retire, you can leave your money in TSP (if the account balance is $200 or more) or you can elect a withdrawal option. If your account balance is less than $5, it will automatically be forfeited to TSP. You may subsequently request that this amount be paid to you.

What age can you withdraw TSP without penalty?

55With the TSP, you are exempt from the early withdrawal penalty if you separate from federal service in the year in which you reach age 55 or later. For IRAs, the early withdrawal penalty will apply on anything you take out up until you reach the age of 59 ½.

Is TSP better than 401k?

Overall, the Thrift Savings Plan compares favorably to 401(k) plans, and if you work for the Federal government and can participate, it very likely makes sense to do so. It serves as a solid adjunct to the FERS pension, and the combination of the TSP and FERS can provide a solid foundation for retirement.

Is a TSP a retirement plan?

The Federal Employees’ Retirement Security Act of 1986 established the Thrift Savings Plan, or TSP. It is a qualified retirement plan made available to current and retired federal government and agency employees.

Why is TSP bad?

The TSP is possibly the most inefficient account to use for a down payment and to pay for college. Savings in an individual account or a Roth IRA would be much better for the down payment as well as paying for college. A 529 plan would also work well to pay for college.

Should I max out TSP?

The Thrift Savings Plan (TSP) is a great tool for federal employees to save for retirement. Saving, and even maxing out your contributions to TSP is normally thought of as a good thing. Yes, maxing out your TSP can be very beneficial, but may not be the best thing for your financial future.

How do I get my money out of my TSP account?

Requesting a withdrawal To request a withdrawal, log into My Account and click on the “Withdrawals and Changes to Installment Payments” link on the menu. From there you’ll have access to an online tool with which to start your withdrawal.

What is the best TSP fund?

The TSP’s C Fund is based on the S&P 500 index and both the C Fund and the C Fund had the best rate of return since 2013. The trailing fund for the year was the G Fund with an annual return of 2.24%. The G Fund is considered the safest of the TSP funds as it always has a positive return.

Do I need to report my TSP on my taxes?

No, you should not include your TSP contributions separately on your tax return. All you have to do is report W2 data in Turbo Tax exactly as it appears on the form. The TSP plan contributions you elect to make come directly out of your salary.

Does TSP affect Social Security?

Most federal employees and their spouses will face Social Security taxation. … In effect, the withdrawal from the TSP triggers two taxes—the tax on the TSP dollar and a tax on your Social Security that you wouldn’t have had to pay otherwise.