Did you know that you can handle most of your Thrift Savings Plan (TSP) transactions online through the My Account portal? This platform offers you the convenience of managing withdrawals, distributions, beneficiary designations, investment changes, and more.
Exploring Your TSP Distribution Options
- Partial Withdrawal: Even if you’re already receiving TSP installment payments, you can request a partial distribution, provided it’s at least $1,000.
- Full Withdrawal: You have the option to withdraw all the funds from your TSP, effectively bringing your account balance to zero.
- Installment Payments: By logging into your TSP account, you can access the “Model Installments” feature in the “Withdrawals and Distributions” section. This tool lets you simulate different installment scenarios before deciding. You can set a fixed amount, with a minimum of $25, or opt for installments based on IRS life expectancy tables. For more details, refer to the TSP Distributions Pamphlet.
Utilizing TSP Funds for a Life Annuity
Your TSP funds can be used to purchase a Life Annuity from MetLife, ensuring a steady stream of income throughout your retirement. However, this isn’t your only choice—other insurance companies offer various annuity products that can be tailored to provide lifetime income, including customizable riders.
Managing a TSP Loan Upon Retirement
If you retire with an outstanding TSP loan, you’ll need to repay it within 90 days of your separation. Failing to do so will result in the TSP treating the unpaid balance as a taxable distribution, which could push you into a higher tax bracket than when you were employed.
Required Minimum Distributions (RMDs)
After leaving federal service, you aren’t required to start withdrawing from your traditional TSP account until you reach age 73. This is when Required Minimum Distributions (RMDs) become mandatory for tax-deferred retirement accounts. Until then, you can leave your money in the TSP, where it will continue to grow tax-deferred.
Tax Implications on TSP Withdrawals
When you withdraw from your traditional TSP account, a portion of the taxable distribution is automatically withheld for federal income tax. The specific withholding rates and rules depend on the type of payment you choose. Keep in mind that distributions from your traditional TSP are taxed as ordinary income in the year they’re withdrawn, which might push you into a higher tax bracket.
Connect with an FRC® trained advisor to learn more about how your TSP works in retirement.
Source: https://www.tsp.gov/
