TSP Tips for Those About to Retire
Here’s what you need to consider before you leave federal service.
The Thrift Savings Plan for federal employees remains the world’s largest defined contribution retirement savings plan, with a total balance as of Sept. 30 of more than $774 billion, and almost 6.5 million participants.
By mid-2022, the TSP will unveil the new Converge Program which will change how the program is administered and offer new options to participants. These include enhanced digital engagement (such as a mobile app), a direct debit feature to allow non-payroll loan repayments, the ability to scan in checks to roll over qualified retirement savings to the TSP, and a mutual fund option that includes thousands of funds, with no limits on trades.
These will provide new ways for TSP participants to maximize their savings. For those who have already done that and are nearing retirement, here are a few things to remember about using the money you’ve saved for all these years.
After receiving a separation notice from your agency, the TSP will open the separation access on your online TSP account. This is where you will make your withdrawal choices. But be patient. For example, if your agency notifies that you’re retiring as of Dec. 31, and you mail your signed form to the TSP (which could take 7-10 days, and may require notarization), then the TSP could take another 60 days to process it. You may not see your first payment until May.
If you choose monthly payments, they will begin once your request is processed. You will receive them about the same time every month. Sometimes, holidays can alter the timing.
You need to keep a balance in your TSP account of at least $200 in order to hold on to the account after you leave federal service.You can also transfer eligible money into your account such as funds from a retirement account from a past employer. After you are separated from federal service, you will be able to make interfund transfers to rebalance your TSP investments if you choose. In 2020, 46% of participants chose to use a lifecycle fund, which eliminates the need for this rebalancing task.
Take some time to learn about your withdrawal options using the online learning opportunities available at the TSP. Upcoming topics include:
- Post-Service Withdrawals (Dec. 14)
- Pre-Separation (Dec. 7)
- TSP Death Benefits (Dec. 8)
The TSP also has a YouTube channel. Check out the recent video aimed at those leaving government service.
Here are some final tips for employees who are moving into retirement:
- Make sure the TSP has your current address at all times.
- If you leave government with an outstanding TSP loan, the balance must be closed out within within 90 days of when your agency reports your separation to the TSP. The TSP will not process a withdrawal from your account until your loan has been closed.
- Read the publication Withdrawing From Your TSP Account for Separated and Beneficiary Participants to fully understand your options.
- Read the tax notice Important Tax Information About Payments From Your TSP Account.
- For those who are retiring at 72 or older, be aware of the deadlines for taking required minimum distribution payments from your TSP account.
- Be aware of security issues. When you receive an email about your TSP account, hover over any links to reveal the URL and make sure the web address looks legitimate before you click on the link. Visit the TSP’s website for more online safety tips and information about protecting your account.