Some day, your Thrift Savings Plan account will begin paying you back. Planning for that day is something you should begin doing now.
“Where you should probably focus first is what your … defined benefits are going to provide to you,” Tom Trabucco, director of external affairs at the Federal Retirement Thrift Investment Board, told Federal News Radio. “I mean both your FERS annuity or your CSRS annuity plus Social Security. Those are the two workhorses that are going to continue to provide you with that monthly payment.”
From there, you can decide how to withdraw TSP money, Trabucco said. The TSP provides a number of methods:
Single payment: This option allows you to withdraw your entire account balance at one time. Some people call it a “lump sum” payment.
Monthly payments: “This option allows you to withdraw your entire account balance in a series of payments spread over time,” according to the TSP website. You can choose a specific dollar amount for your monthly payments or ask the TSP to calculate your payment based on the IRS Life Expectancy Tables.
The amount of your monthly payment must satisfy the IRS minimum distribution rule, Trabucco said. If you choose a lower amount, the TSP will send you a supplementary check to fill the difference.
In addition, the monthly payments option allows you to change the amount once a year, Trabucco said. “It really does still offer you control over your funds both in the size of your withdrawal and in the investment strategy that you want to pursue, because you can still do interfund transfers. … You can put in transfers up until you get to be age 70 1/2.”
Annuity: The TSP single life annuity provides a monthly benefit to the account holder for life. The joint life annuity provides a monthly payment “while you and the person with whom you choose to share your annuity (your ‘joint annuitant’) are alive,” according to the TSP website. “When either you or your joint annuitant dies, the annuity will continue to pay monthly to the survivor for the rest of his or her life.”
Withdrawals from your TSP become mandatory when a person hits age 70 1/2, Trabucco said.