In 1986, the Thrift Savings Plan or TSP was introduced to allow federal workers to invest in a tax-advantaged retirement account. Similar to an IRA, there are traditional TSPs that tax money when you withdraw, and Roth TSPs, where you pay taxes on the contributions but not on the earnings.
If you belong to the Federal Employee Retirement System or the Blended Retirement System, your agency may match the contributions you make. Typically, agencies contribute 1% of the employee’s salary to a TSP and 4% after two years.
But what can you do with your TSP after you retire? Here are some options:
Start Regular Installment Payments
With this option, the Thrift Savings Plan will start paying you a predetermined monthly amount. You can choose how much you want to receive or opt for the standard based on your age.
Once you decide on a regular installment payment, the Thrift Savings Plan will start paying you. You will continue to receive this payment until you terminate your account unless you stop the payments before that. Your regular payments will continue as long as you have money in your account.
Buy an Annuity
An annuity is a financial product that pays you monthly, quarterly, or annually. You have several options for annuities, such as immediate, deferred, and life. Immediate annuities start making payments to you as soon as you set up the annuity.
Deferred annuities make payments to you after a set number of years. Life annuities are for a specific life and will continue to make payments as long as the annuity company is still in business.
With a deferred or life annuity, you get to choose how the payments are made. For example, you could choose payments that continue until you die or payments that stop when you are no longer around. If you have a spouse, you could choose to continue payments after you die if your spouse survives you.
Leave It and Let It Grow in the TSP
You can always leave your money in the Thrift Savings Plan when you retire. The TSP will continue to make contributions for you and manage your investments. Keep in mind; you will not receive any payments from the TSP unless you start making regular payments or buy an annuity.
Make a Single Transfer to an IRA
You can use the Thrift Savings Plan to make a one-time transfer of money to an IRA. Typically, the move is made for a rollover of 401(k) or IRA money into the TSP. The rules and limits are very similar to the IRA, but there are a few differences. If you think of making a TSP to IRA transfer, speak to a financial advisor or accountant.
Conclusion
The Thrift Savings Plan is a great way to start saving for retirement and to supplement your other retirement accounts. In addition to the government matching your contributions, there are no limits to how much you can save and earn. Use the Thrift Savings Plan to reach your retirement goals and secure a comfortable financial future.
If you need federal employee retirement guidance, whether it’s about Thrift Savings Plan or other matters that have to do with your retirement as a federal employee, our experts at My Federal Plan are here to help. Contact us today so we can help you!
