Thrift Savings Plan (TSP)
Thrift Savings Plan (TSP)
What is a Thrift Savings Plan, and How Does It Work?
Thrift Savings Plan (TSP) is a federal government-sponsored retirement saving plan. It offers federal employees and uniformed services personnel the same savings and tax benefits that many private corporations employees get under 401 (k) plans.
The TSP is a defined contribution plan which means the balance in your TSP account depends on the amount you contributed to your account and the earnings on those contributions.
Benefits of TSP
One of the benefits of TSP is automatic payroll contributions and matching contributions from your agency. Most agencies contribute 1% of your salary to a TSP and an up to an additional 4%. The match depends on your own contribution level.
You may make pre-tax contributions into your traditional Thrift Savings Plan, which means the money that goes into the account will not be taxed until it's withdrawn. Also, you may choose to save in a Roth TSP, which allows you to make after-tax contributions to your plan, and you will pay no taxes on the Roth portion when you withdraw the money after retirement.
Why You Need a Financial Advisor
Most people think that they can handle money decisions on their own. Then as lives, careers, and goals expand, they begin to get confused on what to prioritize. That's where a financial advisor comes in. They offer assistance in the management of finances.
A good financial advisor will ask first about your goals and then develop a plan to help you attain them. Retirement is a major milestone in life, and it requires more professional financial advice from an advisor who knows the ins and outs of retirement planning. At Milestone Wealth Advisors, we help you pursue your long-time financial goals to ensure you live your golden years after retirement peacefully. Our approach is not one-size-fits-all. Instead, we have financial products and services tailored to fit your needs.
What happens to TSP at retirement?
The most common question from many federal employees is, " what will happen to my TSP when I retire?". When you retire, you can either:
- Purchase an annuity (trade lump sum balance for a lifetime income)
- Leave the money in the TSP to continue growing
- Make monthly TSP withdrawals for as long as the money lasts.
- Rollover the funds to an IRA
Should I rollover my TSP to an IRA?
You can rollover your TSP once you have left federal employment or you can complete an inservice rollover while still employed once you're at the age of 59.5. Many people rollover their TSP to an IRA. The benefits of rolling your TSP to an IRA all depends on what you are looking for in retirement. In an IRA, you have a broad selection of investment choices and more flexibility in which investment vehicles you can use. Normally these accounts are tied to a financial advisor who can look at all of your finances comprehensively to give you advice on how to invest, when to withdraw, and how much you can withdraw without running out of money. Yes, the TSP is low cost, and that’s great, but it’s hard to beat good advice.
One benefit that an IRA Annuity has over the Annuity option in the TSP is, you do not forfeit the money for the lifetime stream of payments, and if you pass away the remaining account balance goes to your heirs.
If you're contemplating retirement or moving to a new job, a fiduciary financial planner / advisor can help you make the right choices for rolling over your TSP or withdrawing the funds.Navigating the retirement planning process alone can be challenging, especially if you have insufficient knowledge of the best investment plans. At Milestone Wealth Advisors, we offer a fiduciary team-based approach and a wide array of financial planning services to meet your needs no matter which milestone you're at in life. So give us a call today or email to schedule a no obligation first meeting so that we can help maximize your retirement planning. Check out our website!