Do you spend more time planning vacations than thinking about your retirement withdrawals? If so, you might want to reconsider. Retirement could last 30 years or more, so it deserves the same focus you’d give to any big life event. After all, it’s your future!
Your TSP: The Part of Retirement You Control
When you retire under FERS, your pension and Social Security benefits are set in stone based on calculations made at the time you stop working. Sure, you can increase your FERS pension by working longer or delay claiming Social Security until age 70 for a bigger payout. But once you’re retired, those amounts are fixed.
That leaves your Thrift Savings Plan (TSP) as the one source of income you can actively manage. That’s why having a solid TSP withdrawal strategy is so important—it gives you control over a critical part of your financial future.
Have You Decided How You’ll Withdraw Your TSP Funds?
When it comes to withdrawing from your TSP, you’ve got options. You can take monthly, quarterly, or annual payments in fixed dollar amounts as long as each installment is at least $25. Plus, you can decide whether those payments come from your traditional or Roth balance first.
Not sure how long your savings will last? You can let the TSP calculate your installments based on IRS Life Expectancy tables. These payments adjust based on your age and account balance, which could help stretch your savings for the long haul.
Planning for RMDs: A Key Part of Your Strategy
Thanks to the SECURE Act 2.0, the age for Required Minimum Distributions (RMDs) on your traditional TSP balance is now 73. This gives your money more time to grow tax-free. But don’t forget—RMDs are fully taxable, and taking them could bump you into a higher tax bracket.
To avoid surprises, consider adding post-tax contributions to your Roth TSP. That way, you can take tax-free withdrawals in retirement, giving you more flexibility when it’s time to budget for RMDs.
Don’t wait too long to figure out your TSP strategy—it’s easier to plan now than to scramble later. Talk to an FRC® trained advisor and make sure your money lasts as long as you do.
