TSP Withdrawals (pension, social security, federal, retirees)
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I have a friend who recently fell on hard times and is eligible to withdraw from his TSP. It is a long story but he is trying to survive until money starts coming in so he took a withdrawal from his TSP. What he's waiting for hasn't panned out yet and he went to take more money and was informed that you can only do one withdrawal after separating from service and then you either have to take out the entire amount or start getting payments. I always thought that you could just take what you wanted but obviously I am dead wrong.
I started to panic because my husband was put on FERS Disability Retirement a couple of months ago and because OPM is so far behind he hasn't seen a single payment. To top it off, my job ends at the end of May and money is already tight. They are saying he might not see a dime for another two or three months.
The only place we have money to take from is my 401K (but I would incur penalties) or my husband's TSP. We didn't want to take anything out of it but we might be forced to. However - now that I know he can only make one withdrawal....and that's it....that is a little disheartening. I wanted him to leave it in there for several more years before touching it. But, what if we have another need arise?
Any suggestions or comments? Bottom line is that we don't want to take anything....but we may have no choice.
How old is your husband? If he's 59 1/2 you could consider transferring most/all to an IRA at Vanguard or another similar outfit. There the withdrawal restrictions would not be as onerous as they are at TSP. But if at all [possible, leave it in the TSP as long as possible.
Take out one large withdrawal, take from that some living expenses, and park the bulk of it in a safe place like a short term CD. I don't know if you can plow the money back into your TSP once it's been removed, but at least you've taken out enough that one time so that if you need more you can get at it. Actually, you could park the bulk in a longer, higher yielding CD, and even if you have to break it before term you only lose part of the interest, not the principal.
Quote:
Originally Posted by vermonter16
I have a friend who recently fell on hard times and is eligible to withdraw from his TSP. It is a long story but he is trying to survive until money starts coming in so he took a withdrawal from his TSP. What he's waiting for hasn't panned out yet and he went to take more money and was informed that you can only do one withdrawal after separating from service and then you either have to take out the entire amount or start getting payments. I always thought that you could just take what you wanted but obviously I am dead wrong.
I started to panic because my husband was put on FERS Disability Retirement a couple of months ago and because OPM is so far behind he hasn't seen a single payment. To top it off, my job ends at the end of May and money is already tight. They are saying he might not see a dime for another two or three months.
The only place we have money to take from is my 401K (but I would incur penalties) or my husband's TSP. We didn't want to take anything out of it but we might be forced to. However - now that I know he can only make one withdrawal....and that's it....that is a little disheartening. I wanted him to leave it in there for several more years before touching it. But, what if we have another need arise?
Any suggestions or comments? Bottom line is that we don't want to take anything....but we may have no choice.
Thanks stoutboy, we might have to look at something like that. He is 59 1/2. I just didn't know that they kept the money like that. I just thought you could take a little out here and there....that's my fault for not doing research ahead of time. I'm glad I know now before we make a withdrawal, if we have to. I'm going to try everything possible not to have to make a withdrawal though.
I recommend the tsp dot gov website and to look at withdrawal strategies after leaving federal service. One option is to choose monthly payments. Unfortunately once you start them you cannot stop them, but once a year you can change the amount and have it be as low as $25/month. You can withdraw your entire account balance using a combination of any of the available full withdrawal options (single payment, monthly payments, or life annuity).
TopDown....hmmmm, good idea. I didn't know that you could change the monthly amount once a year. That might be something to look at as well. Good thinking.
I would love to know what the following acronyms mean: TSP, FERS, and OPM. I'll try a guess on FERS: Federal Employee Retirement System? Sometimes I enjoy reading threads where I know I don't know enough to have any input just as a means of learning something. But when I am not familiar with the alphabet soup I just cannot follow. So sorry for the interruption.
I would love to know what the following acronyms mean: TSP, FERS, and OPM. I'll try a guess on FERS: Federal Employee Retirement System? Sometimes I enjoy reading threads where I know I don't know enough to have any input just as a means of learning something. But when I am not familiar with the alphabet soup I just cannot follow. So sorry for the interruption.
TSP = Thrift Savings Plan
TSP is the government's version of a 401(k) plan. FERS emloyees receive matching contributions, but CSRS employees do not.
FERS = Federal Employees Retirement System
FERS came into being in 1987 when Congress revamped the federal retirees' program and, with some exceptions, basically covers all federal employees first hired after 12/31/83. It is a three-pronged system consisting of a small defined benefit pension, Social Security, and TSP. FERS employees receive up to 5% in matching contributions to their TSP accounts.
CSRS = Civil Service Retirement System
CSRS covers federal employees first hired before 1/1/84. CSRS employees are not covered by Social Security, do not receive matching contributions for any contributions made to their TSP, but receive a generous defined benefit pension that is based on their years of service. CSRS employees contribute 7% of their salary to the Civil Service Retirement Fund. (There is a small subset of CSRS employees who are also covered by Social Security, but these employess have their CSRS pension reduced by the amount of their Social Security checks.)
OPM = Office of Personnel Management
OPM is the federal government's centralized HR agency. OPM coordinates all benefits programs for federal employees and retirees, with the exception of TSP. OPM makes the rules and regulations for the health and life insurance programs, and administers the retirement program for all federal employees, regardless which agency they work for. OPM also handles other HR areas, such as time & attendance rules, the leave program, and pay regulations.
Thanks Mad Man. You were kind to take the time to post that information. Coming from you, I know it is accurate as well.
It wouldn't take a genius to realize I was never a Federal employee. Nevertheless it is interesting to know something about that system and its retirement features.
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