Before taking money out of your Thrift Savings Plan (TSP) in retirement, it’s important to know your options so you can choose what works best for you.
The SECURE Act 2.0 and TSP Required Minimum Distributions (RMDs)
You don’t have to take any money from your traditional TSP until you reach the Required Minimum Distribution (RMD) age. The SECURE Act 2.0, signed by President Biden, made changes to give your TSP more time to grow:
- Starting January 1, 2023, the RMD age is now 73 for those born after December 31, 1950.
- Beginning January 1, 2024, Roth TSP balances won’t be subject to RMDs. Only your traditional TSP balance will count for RMD calculations.
- By 2033, the RMD age will increase to 75.
Keep in mind: withdrawals from a traditional TSP are taxed as ordinary income in the year you take them.
Your 4 TSP Distribution Options
You have four ways to take money from your TSP:
- Partial Distribution: You can take part of your TSP balance while still receiving installment payments. Each partial distribution must be at least $1,000, and you can take as many as you want, but only one every 30 days.
- Total Distribution: You can take out all your money from your TSP, bringing your balance to $0. However, this means you can’t add any more money from eligible plans, and installment payments will stop.
- Installment Distributions: Log into your TSP account and use the “Model Installments” tool to see how different amounts affect your payments. You can choose a fixed amount of at least $25, or let the TSP calculate the payments based on your life expectancy.
- Buying an Annuity: The TSP Life Annuity is an insurance product from MetLife that provides a stream of income for life. You can also explore annuities from private companies that may offer better payouts and customized options.
Remember, any withdrawals from your traditional TSP will be taxed as income in the year you make them. For more details, download the TSP Distributions Pamphlet or talk to an FRC® trained advisor for help with your withdrawal strategy.
