What To Do With Your TSP When You Separate | TSP ROLLOVER EXPLAINED

Are you leaving federal employment, retiring from the government, getting out of the military, or separating from federal service? A big question you have to ask is what to do with your TSP? Whether you're retiring with a TSP or getting a new job you have the following 3 options...

1) WITHDRAW THE MONEY FROM YOUR TSP:
If you choose to cash out your TSP before age 59.5 you will be hit with taxes and a 10% penalty. However, if you choose to rollover your TSP to a qualified retirement account, such as a 401k or IRA, you won't be penalized.

2) LEAVE MONEY IN TSP:
If you are age 59.5+, you can start withdrawing monthly payments from your TSP. If you worked up until age 55 with the feds, you can start withdrawing early at age 55. If you were a "Special Category" employee (ie Law enforcement, firefighter, air traffic control) and you worked with the government until age 50 you can start withdrawing early at age 50. Once you leave the military or federal government you can no longer contribute more money into your TSP but you can change around your investments within the TSP.

3) BUY ANNUITY WITH TSP:
At retirement age you have the option to buy an "Annuity". The more money you have in your TSP the higher the annuity will pay out. An annuity is similar to an insurance plan, it's a guaranteed agreement unless of course the company you made the agreement with goes under. Right now MetLife is selling the annuities for the TSP. You are trading the lump sum amount of your TSP for a [safe] fixed monthly payment (such as $1,000/month) for the rest of your life. This differs from Option 2 because you are limiting risk but sacrificing that you could have made better monthly returns by doing Option 2.

TSP vs IRA: Rolling over your TSP to an IRA is a popular option. The benefit to a TSP is you may be able to withdraw money before age 59.5, unlike an IRA. The benefit to an IRA is you have many more investment options, better control, and a more user friendly company to work with. If you do want to rollover your TSP to an IRA follow these steps: 1) Open an IRA with a company like Fidelity, Schwab etc. 2) Fill out form TSP 70, and 3) Invest the money once it has been transferred into your IRA.

🎒FINANCIAL BOOKS I HIGHLY RECOMMEND:

This video is not sponsored. Some product links are affiliate links which means if you buy something I may receive a small commission at no extra cost to you. This is not investment advice.

#timwolffe #personalfinance

00:00 Intro
00:32 Option 1 Withdraw
01:20 Option 2 Leave it in TSP
05:23 Option 3 Buy an Annuity
07:12 TSP vs IRA
09:04 How to Rollover TSP

[Kaiden-Bentley]

I'm 54 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, and we are finding it impossible to replace them. We can get by, but can't seem to get ahead. My condolences to anyone retiring in this crisis, 30 years nonstop just for a crooked system to take all you worked for.

[tammycobaugh]

Yes .... "Anything you do with the federal government is harder than it has to be"

[LonerBecause]

Even though I won't use this until years down the line. This is a gem of information to know for retirement involving the TSP.

[aoronqui]

You forgot the other negative for the TSP. If you are moving money/shares between funds sometimes it takes a full day to complete the transaction.

[pf]

Thanks for this video, I knew it would basically be a trap to do a large lump sum withdrawal.

[RickMartinYouTube]

Rollover process is a little complicated if you have tax-free contributions (ie contributions Soldiers make when they're in combat zone) ---I'm dealing with this right now. TSP sent me a check (FBO) instead of to Vanguard. Now the clock is ticking to get the money out of my hands and into an IRA conversion account.

[markmiller]

Please keep in mind 9 states that normally have income taxes (e.g. NY, Pennsylvania) DO NOT tax the traditional TSP as they consider part of your civil servants pension. If you move the TSP money into an IRA at say Vanguard, Fidelity, etc... you will lose this special tax break and will now have to pay state taxes on the money when withdrawn. This is something you should be aware of before you transfer any monies out of the TSP.

[deenalarsen]

Before any federal employee leaves the tsp for something else please ask the person asking you to do so one what is their commission what are they getting out of this to how much is this new fund a IRA going to charge for administration tsps rates are $0.45 per thousand dollars see if you can beat that

[bradh]

You don't have to use your entire balance to purchase the annuity. You can use as much or as little as you want. This way, you can have a guaranteed income without losing the ability to invest and grow a portion of your savings while still keeping a rainy day fund that you can make large withdrawals from.

[UltraKryptonian]

Wow! Great job explaining TSP strategies… SUBSCRIBING!!

[kidnplay]

So why would we wanna keep our money in it if we can’t add money to it

[NATOnova]

surprised you didn't mention the ability of rolling roth tsp to roth ira then withdrawing contributions at any age. This fact propels me to invest heavily in the TSP, cause I know I can withdraw it fairly easy if I want to once I leave military and roll it over to an roth ira

[joesteel]

Buying an annuity you can die a few days after retirement then you lose it all. Best to leave it alone or transfer some or all to an IRA. That way if you roll it over, you might delay the tax, else if you do a withdraw of say $1, 000, you're taxed 20% and only get $800. Most of use won't earn enough to pay taxes if and when we file so why give up the 20% upon withdrawal, when we can earn interest on it with a good money market savings account. However, remember TSP has much lower fees than non-federal organizations. My thought, roll over what you plan to use to an IRA then do distributions as needed or required. pay taxes when you file if you do own any, otherwise, don't.

[johnhansen]

Is that you tv with the flames going in the background?

[m.a.]

Your video is a wealth of Info. There is so much misguidance out there. I'm 50 Yeats old and still a federal worker and hit 30 years of creditable service Sept 21, 2021. What good options do I have if I walk away at the end of this year?

[ArturoGarzaID]

Can this all be done on the TSP website now, or do we still need to fill out that TSP 70 form? When I open an IRA with another broker can it be a Traditional IRA or does it need to be a Rollover IRA and is The Rollover IRA only for transferring the Traditional 401k, would I also need to open a Roth IRA as well?

[aftech]

Can a 20 year retired military member who receive disability compensation contribute portion of their disability compensation into the TSP? Since TSP wont allow retirement pay…what would be a better option roll it into robin-hood or fidelity and be able to contribute from there monthly?

[BobbySmith-uofx]

it would help to tell people what tsp stands for.

[tomd.]

i thank you for this informative video, but i have concerns regarding taxes/monthly withdrawals in retirement....every withdrawal, the government takes the 20% for taxes...how do the federal taxes work with an IRA ?

[derrickhensley]

Could you/should you rollover while still in service?