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Retirement  & TSP

What to do with your TSP?

This is a big burning question for all military and federal employed families.  So what is the answer? That depends on your situation!

First, talk with your  financial advisor who has more than 19 years of experience in helping families transition from military and federal civil service jobs.  Retired Command Sargent Major Merle Jones has dedicated his business to helping others tackle this question. 

What Are Your Options?

When your employment ends with the military or civil service and you can no longer contribute to your TSP account, you are faced with several decisions. 

  • Roll your TSP account into an IRA
  • Transfer your TSP account into a Qualified Annuity
  • Leave your assets in your TSP account
  • Withdraw your TSP account as a lump sum (Significant Tax Consequences) 

Rolling your Thrift Savings Plan into a Traditional IRA will help you avoid the 10% early withdrawal penalty, and will keep your money growing tax-deferred.  You will also have more control of your IRA assets, gain unlimited investment options, and greater growth potential.  You will have the opportunity to add monthly, quarterly or annual contributions.  Having total control of your IRA will also allow you to limit your expenses and give you more opportunities to withdraw your assets for certain circumstances.

Transferring your TSP into a Qualified Annuity is an option that few people are aware of.  However, picking the correct annuity is a big decision.  Our expert team at Jones Investment Group is experienced in helping families choose the right annuity for their retirement needs and family.  Annuities can play an important role in your retirement plan, whether you are trying to increase your retirement savings, or whether you need guaranteed income.  An annuity can create an income stream for life.  This additional income, if not needed for daily expenses, can be used in retirement for travel, hobbies, and spending special time with loved ones. We like to call this “Making Memories Money.”  Unlike other retirement plans or pensions, an annuity can also provide a legacy for your spouse and family.  Like your TSP, Fixed Indexed Annuities have low or even no fees, making this a great choice for many families.

Fixed Annuities are products of the insurance industry and are designed for long-term retirement investing. Annuity guarantees are subject to the claims-paying ability of the insurance company. Surrender charges may apply if money is withdrawn before the end of the contract. All withdrawals of tax-deferred earnings are subject to current income tax, and, if made prior to age 59½, may also be subject to a 10% federal income tax penalty. Annuities generally contain fees and charges which include, but are not limited to, sales and surrender charges. Additionally, if purchased within a qualified plan, an annuity will provide no further tax deferral features. The contract, when redeemed, may be worth more or less than the total amount invested.

Being ready for retirement doesn't just mean you've saved enough money.  

It also means feeling confident because you have the income you need.

Leaving your assets in your TSP is the easiest option, and the fees are quite low.  However, you need to keep in mind that you will no longer be able to make additional deposits to your account or take a loan from it.  TSP also has limited investment options, with only 5 main funds to choose from.  Leaving your assets in your TSP also makes you responsible for making strategic moves during Up and Down markets.  The big question to ask yourself is, “Do I want to spend my retirement days watching the market, or on the beach?”

Withdrawing your TSP in a lump sum is not usually recommended.  This option should only be considered if the funds are needed immediately.  TSP requires 20% mandatory federal tax withholding, which reduces the amount you will receive. You may also be subject to a 10% early-withdrawal penalty if you are under age 59 ½. In addition, you will lose all tax-deferral benefits, potential future earnings, and most importantly, you will reduce the amount of money you have saved for retirement. 

What is the Best Option for Your TSP? 

Contact Us Today to discuss your Transitioning Options

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