Thread: Retirement Withdrawal Options... Guidance Please

The TSP will sell your shares across the board - you have no say or choice, it's IRS regulated. However, in an IRA you will at least have choice and flexibility of choosing which assets or combination of assets to sell to pay the minimum required distribution for taxes. If you have enough dividend income that my cover the RMD and your capital appreciation will continue unchallenged. In an IRA you make your payment choices at the end of year.

Here are a few Q&As from IRS.Gov. Worth reading.

Retirement Plans FAQs regarding Required Minimum Distributions

Thank you Scout333. The information in the IRS link helps me understand the required minimum distributions better. It appears I will not be able to accomplish what I wanted to...at least the "way" I wanted to.

So, if I begin taking monthly payments now at age 65, say at a modest 4.5 - 5% (while attempting to preserve my TSP balance), When I turn 70 1/2, IRS rules still require minimum distributions (??). It appears these distributions will be based on my life expectancy age, and amount in my TSP balance. So, I will need to take those minimum distributions and set them aside in another savings program to preserve the funds (??) - that is how it all appears to me.

My present balance is 312K. When I retired 8 years ago, I had 135K, and I have been pleased with how my balance has grown, especially since I have not been allowed to make further contributions. My intentions were to take a modest amount out each month, to preserve the balance. I don't know how appropriate it is to be specific here on the forum with $$ amounts, but one of the posters in this thread said it is difficult to offer help without knowing the account balance. It appears to me that I could take about 1,200 out per month (4.5%). Then, when I am 70 1/2 deal with the required minimum distributions IRS requires.

Am I correct in these thoughts? Your collective wisdom is most appreciated

Welcome, Dave95 !

I see you've entered the murky world of the "how much can I withdraw ?" question...believe me ; it's an art, not a science ! Everybody's situation is different

The short answer to your question is...figure out your yearly rate of return, and use the specified monthly withdrawal amount, adjusted annually. In fact, I have my TSP-73 in front of me right now ! That's the form used for changing your monthly distribution. As you noted, when you hit that RMD age, you'll need a new strategy to preserve your principal, regardless of the tax-deferred investment vehicle.

I assume you've already done all the basics, like estimate your expenses first, and the source(s) of income to meet those expenses (your pension, Wife's pension, Wife's 403(b) (?), Social Security, etc), and you're still a little short....thus, the need to tap your TSP now. In my case, the Wife was also a school Teacher.

My 2 pieces of advice ? First...if your Wife just retired, wait a while and see how your expenses shake out. For instance, I was surprised at how our gasoline use dropped, after neither of us were driving to work ! Also, it's nice not paying a Social Security tax anymore ! OTOH, the amount we're spending on her hobbies skyrocketed

Second : Seriously consider rolling your TSP into an IRA, as Birch recommended. You can then have a LOT more flexibility on where your money is invested ; you can be as active or passive as you want ; and the best part...you can withdraw whatever amount you want, whenever you need it (like for 1 of those home maintenance bills !). Of course, you'll pay tax, and you'll still have to deal with an RMD down the road. Many on the Board will argue the pros and cons about that approach, and there are good reasons to go either way, so you have to look at it from your own perspective. Be careful, though, because with some TSP withdrawal decisions, there's no going back !

For me, we don't have Kids, or anyone else we want to make rich when we die, so "estate planning" wasn't a factor. We rolled the Wife's 403(b) into an IRA ; took the one-time "partial withdrawal" and rolled most of my TSP balance into an IRA ; and kept a small balance in my TSP, based on an estimate of what we'll need over the next 3 years, which I'm withdrawing as the "full withdrawal" with a specified monthly amount. That makes sense for us, because I avoid the tax penalty on the distribution because I'm not yet 59 1/2 (like I'd have on the IRA). For you both, that's not an issue, since you're 65...

Anyway...best of luck ! Read through some of the other threads, and ask questions ! LOTS of good discussions about homes, paying off mortgages, life insurance, etc etc, and plenty of people willing to share their knowledge and experience !


Stoplight...

Thank you Stoplight. I appreciate you taking the time to write as much as you did. It helps me - really ! I never thought about converting to an IRA until now. I will continue to read as much as possible before making a decision regarding my TSP.

As far as estate planning goes, well - I certainly want to be sure my wife will continue to pay the bills. As far as my kids go, they are both adults now in their 30's, but when they were going to college, they both accumulated substantial debt. Perhaps I could have done more to help them, but from what I was reading at the time, it was best to sure up my own retirement for senior years rather than divert all available money toward their education. I paid some, but they both absorbed the Lions share of debt. They don't know I am trying to leave them a little, but it makes me feel good if I could leave them both about 100K. They could pay off any remaining college debt or do whatever with it.

Originally Posted by Stoplight

Welcome, Dave95 !

I see you've entered the murky world of the "how much can I withdraw ?" question...believe me ; it's an art, not a science ! Everybody's situation is different

The short answer to your question is...figure out your yearly rate of return, and use the specified monthly withdrawal amount, adjusted annually. In fact, I have my TSP-73 in front of me right now ! That's the form used for changing your monthly distribution. As you noted, when you hit that RMD age, you'll need a new strategy to preserve your principal, regardless of the tax-deferred investment vehicle.

I assume you've already done all the basics, like estimate your expenses first, and the source(s) of income to meet those expenses (your pension, Wife's pension, Wife's 403(b) (?), Social Security, etc), and you're still a little short....thus, the need to tap your TSP now. In my case, the Wife was also a school Teacher.

My 2 pieces of advice ? First...if your Wife just retired, wait a while and see how your expenses shake out. For instance, I was surprised at how our gasoline use dropped, after neither of us were driving to work ! Also, it's nice not paying a Social Security tax anymore ! OTOH, the amount we're spending on her hobbies skyrocketed

Second : Seriously consider rolling your TSP into an IRA, as Birch recommended. You can then have a LOT more flexibility on where your money is invested ; you can be as active or passive as you want ; and the best part...you can withdraw whatever amount you want, whenever you need it (like for 1 of those home maintenance bills !). Of course, you'll pay tax, and you'll still have to deal with an RMD down the road. Many on the Board will argue the pros and cons about that approach, and there are good reasons to go either way, so you have to look at it from your own perspective. Be careful, though, because with some TSP withdrawal decisions, there's no going back !

For me, we don't have Kids, or anyone else we want to make rich when we die, so "estate planning" wasn't a factor. We rolled the Wife's 403(b) into an IRA ; took the one-time "partial withdrawal" and rolled most of my TSP balance into an IRA ; and kept a small balance in my TSP, based on an estimate of what we'll need over the next 3 years, which I'm withdrawing as the "full withdrawal" with a specified monthly amount. That makes sense for us, because I avoid the tax penalty on the distribution because I'm not yet 59 1/2 (like I'd have on the IRA). For you both, that's not an issue, since you're 65...

Anyway...best of luck ! Read through some of the other threads, and ask questions ! LOTS of good discussions about homes, paying off mortgages, life insurance, etc etc, and plenty of people willing to share their knowledge and experience !


Stoplight...

Son, you are going to live to be 95 - which means you need to own as many dividend paying equities as possible during that time frame. Snort.

Originally Posted by dave95sps

Thank you Stoplight. I appreciate you taking the time to write as much as you did. It helps me - really ! I never thought about converting to an IRA until now. I will continue to read as much as possible before making a decision regarding my TSP.

Dave95,

You're welcome ! I DO tend to be rather...ummm..."verbose", when I respond to questions like yours I hope to provide the most info I can, as well as explain my "real-world" experience, rather than what all the books and pamphlets say...it's that "pay it forward" thing...many here have helped me, too !

Besides...I'm retired ! I have nothing better to do than write lengthy posts

Originally Posted by dave95sps

As far as estate planning goes, well - I certainly want to be sure my wife will continue to pay the bills. ...They don't know I am trying to leave them a little, but it makes me feel good if I could leave them both about 100K. They could pay off any remaining college debt or do whatever with it.

You sound like you've done the right thing, and continue to do the right thing for the future of both your Wife and Kids ! You're a "good person" ! Search around the Board for some of the discussions about buying term life insurance to provide an "estate" for the Wife and Kids...that's an interesting option I never thought of until I saw it here on the Board !

Also, (and I may be preaching to the choir !)...as prior service, check out USAA. Both the Wife and my self-directed IRA's are with them, as well as many other products. Yes, there are other companies with IRA products, that have better-performing funds, or cheaper fees, or longer trading hours, etc...but I've never found anything yet that I wanted to buy for our IRA's that I haven't been able to acquire through USAA, and their customer service is top-notch ! For example, I hold some PIMCO mutual funds in my account....

Good luck with your planning and investing !


Stoplight...

Hello Stoplight, I appreciate you sharing your experience, but I dont understand this part

"I'm withdrawing as the "full withdrawal" with a specified monthly amount."

Welcome, Dave95 !

I see you've entered the murky world of the "how much can I withdraw ?" question...believe me ; it's an art, not a science ! Everybody's situation is different

The short answer to your question is...figure out your yearly rate of return, and use the specified monthly withdrawal amount, adjusted annually. In fact, I have my TSP-73 in front of me right now ! That's the form used for changing your monthly distribution. As you noted, when you hit that RMD age, you'll need a new strategy to preserve your principal, regardless of the tax-deferred investment vehicle.

I assume you've already done all the basics, like estimate your expenses first, and the source(s) of income to meet those expenses (your pension, Wife's pension, Wife's 403(b) (?), Social Security, etc), and you're still a little short....thus, the need to tap your TSP now. In my case, the Wife was also a school Teacher.

My 2 pieces of advice ? First...if your Wife just retired, wait a while and see how your expenses shake out. For instance, I was surprised at how our gasoline use dropped, after neither of us were driving to work ! Also, it's nice not paying a Social Security tax anymore ! OTOH, the amount we're spending on her hobbies skyrocketed

Second : Seriously consider rolling your TSP into an IRA, as Birch recommended. You can then have a LOT more flexibility on where your money is invested ; you can be as active or passive as you want ; and the best part...you can withdraw whatever amount you want, whenever you need it (like for 1 of those home maintenance bills !). Of course, you'll pay tax, and you'll still have to deal with an RMD down the road. Many on the Board will argue the pros and cons about that approach, and there are good reasons to go either way, so you have to look at it from your own perspective. Be careful, though, because with some TSP withdrawal decisions, there's no going back !

For me, we don't have Kids, or anyone else we want to make rich when we die, so "estate planning" wasn't a factor. We rolled the Wife's 403(b) into an IRA ; took the one-time "partial withdrawal" and rolled most of my TSP balance into an IRA ; and kept a small balance in my TSP, based on an estimate of what we'll need over the next 3 years, which I'm withdrawing as the "full withdrawal" with a specified monthly amount. That makes sense for us, because I avoid the tax penalty on the distribution because I'm not yet 59 1/2 (like I'd have on the IRA). For you both, that's not an issue, since you're 65...

Anyway...best of luck ! Read through some of the other threads, and ask questions ! LOTS of good discussions about homes, paying off mortgages, life insurance, etc etc, and plenty of people willing to share their knowledge and experience !


Stoplight...

It all depends on your need but it's best you expand your investment when withdrawing. You use money to make more money. Mor investments means more income.


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