The thrift savings plan (TSP) is arguably the most extensive contribution plan available. It is the go-to plan for Americans who want a secure and dependable retirement plan.
For many years, federal employees have trusted the TSP with their retirement savings for almost their entire professional life: enjoying the flexibility, low service fees, and convenience of using this savings plan.
However, upon retirement, these employees can transfer all the funds to an eligible employer plan or an individual retirement account (IRA).
Nevertheless, many have chosen to keep their retirement savings in the Thrift Savings Plan because of the length of years and trust of using the TSP.
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It is important to note that funds cannot remain indefinitely in the TSP account after retirement. Every April 1st, federal retirees at the age of 72 are required by law to take the Required Minimum Distribution (RMDs) from their TSP accounts.
By extension, taking RMDs means federal retirees at the age of 72 will now be required to pay for deferred taxes over the years.
This new policy changes the question automatically from: “Should I leave my money in the TSP?” to “What Will My Tax Bill Look Like Upon Retirement?”
The answer to this question is uncertain; however, one thing is sure about future tax rates: they will not be constant. Hence, while the idea of leaving money in the thrift savings plan seems like a good idea, the thought of unpleasant future taxes is one that federal retirees must consider before going along with the TSP.
Nevertheless, the beacon of hope is that federal retirees can reduce the risk of future tax by putting money in Roth TSP accounts, which allow taxes to
be paid on money saved towards your retirement, to the end that all future withdrawals would be tax-free.
Furthermore, the TSP has limited investment opportunities compared to other tax-favored retirement accounts. For instance, IRAs permit you to invest in various assets, including stocks, bonds, mutual funds, and REITs. However, TSP has only five core funds, four of which are indexed.
The Thrift Savings Plan (TSP) is one of the most prominent retirement accounts, with countless benefits and profound flexibility. Its unbeatable bonds and low-cost funds are a few of the numerous benefits that its users enjoy.
However, it also has a few disadvantages, which may cause federal retirees to question their decision to leave their money in the TSP.
Nevertheless, a clear assessment of your intended post-retirement lifestyle and some advice from a financial professional will help you answer the question: “Is Leaving Your Money In The TSP A Good Idea?”
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Bio:
After entering the financial services industry in 1994, it was a desire to guide people towards their financial independence that drove Aaron to start Steele Capital Management in 2013. Armed with an extensive background in financial planning and commercial banking coupled with a sincere passion for helping people, Aaron has the expertise and affinity for serving the unique needs of those in transition. Clients benefit from his objective financial solutions and education aligned solely withhelping them pursue the most comfortable financial life possible.Born in Olympia, Washington, Aaron spent much of his childhood in Denver, Colorado. An area outside of Phoenix, Arizona, known as the East Valley, occupies a special place in Aaron’s heart. It is where he graduated from Arizona State University with a Bachelor of Science degree in Business Administration, started a family, and advanced his professional career.Having now returned to his hometown of Olympia, and with the days of coaching his sons football and baseball teams behind him, he now has time to pursue his civic passions. Aaron is proud to serve on the Board of Regents Leadership for Thurston County as the Secretary and Treasurer for the Morningside area. His past affiliations include the West Olympia Rotary and has served on various committees for organizations throughout his community.Aaron and his beautiful wife, Holly, a Registered Nurse, consider their greatest accomplishment having raised Thomas and Tate, their two intelligent and motivated sons. Their oldest son Tate is following in his father’s entrepreneurial footsteps and currently attends the Carson College of Business at Washington State University. Their beloved youngest son, Thomas, is a student at Olympia High School.Focused on helping veterans and their families navigate the maze of long-term care solutions, Aaron specializes in customized strategies to avoid the financial crisis that care related expenses can create. Experience has shown him that many seniors are not prepared for the economic transition that takes place as they reach an advanced age.With support from the American Academy of Benefit Planners – an organization with expertise and resources on the intricacies of government benefits – he helps clients close the gap between the cost of care and their income while protecting their assets from depletion.Aaron can help you and your family to create, preserve and protect your legacy.That’s making a difference.
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