tsp one time withdrawal at risk
L1: tsp one time withdrawal at riskI retired 2 years ago Fed. Govt. (Yea!) and need to access my TSP money. I am going to do a one time withdrawal to a regular IRA, tap into the money (72T) till I am 59 1/2 then (if interests rates improve) put it back into the TSP (this is allowed) and take out a lifetime annuity or monthly payouts. The problem is when taking a one time withdrawal the TSP will only send the money to one institution. . .since the amount is more than the 250k that is insured by the FDIC, the remainder is at risk until I get it moved, and I do not want to take a risk with the remaining 150k. The TSP will only give a rough idea when the money will be transferred (sometime between 3 weeks and 2 months). . .they send it out as a check and the banks sit on it until it has cleared. With the weekly bank failures I could lose a lot of money if the timing is bad. Has anybody else figured out what to do to avoid this. Too many banks are failing to risk that much money.2010-10-07 16:15, By: jay, IP: [22.214.171.124]
L2: tsp one time withdrawal at riskHow old were you on December 31st of the year you retired from Federal service?
What date will you be 59 1/2?
Please answer these two questions and then I can address your questions.
Jim2010-10-07 16:25, By: Jim, IP: [126.96.36.199]
L3: tsp one time withdrawal at riskFUYI: I was age 50 at end of year I retired (2008), I will be 59 1/2 in more than 5 years.2010-10-07 16:28, By: jay, IP: [188.8.131.52]
L4: tsp one time withdrawal at riskYou might want to try another list-serve at www.457.net2010-10-07 16:56, By: dlzallestaxes, IP: [184.108.40.206]
L5: tsp one time withdrawal at riskDLZ:
Why send him to a 457 site? TSP is a 401(a) and has nothing to do with 457 plans.
Jim2010-10-07 17:13, By: Jim, IP: [220.127.116.11]
L6: tsp one time withdrawal at riskBecause they discuss all types of Government-related plans, not just TSP.2010-10-07 17:27, By: dlzallestaxes, IP: [18.104.22.168]
L2: tsp one time withdrawal at riskYou appear to be very risk averse since you are looking for FDIC which means the bank and CD’s. You are also correct that many banks today have problems keeping the doors open. However, when one bank fails and is taken over by regulators, they have another, presumably stronger bank waiting in the wings to take them over and operations continue as if nothing happened. IMHO you are putting too much concern on the FDIC aspect of your delima.
Based on your answers to my questions, you will definitely need to set up a 72(t) or SEPP Plan. However, transferring funds into the bank is the least of your worries. Banks are rarely (I would like to say “never” but then someone would find the one bank to disprove me) if ever set up to properly run a SEPP Plan. Interest generated probably will not fund your required monthly SEPP Plan distribution so you will need to invade the principal which mans “early distribution of the CD” which has it’s own penalty. In short, I do not recommend trying this with a bank.
You can run a SEPP Plan directly from your TSP account. You would calculate the correct monthly distribution amount, preferably using the Amortization method and never planning to change it until you complete the plan after age 59 1/2 in your case. Simply enter the SEPP Plan calculated, monthly distribution amount on Line 23c of TSP Form 70. Since you can only request even dollar amounts you will need to ROUND DOWN to the nearest whole dollar. You can do it but it is a real challenge and is not recommended. You will be better off moving the entire TSP amount ($400k) into an IRA Money Market account then splitting that IRA into two … SEPP Plan account and Non-SEPP Plan account.
My last suggestion is for you to seek out the advice of an Independent Investment Advisory Representative with a Registered Investment Advisor firm which you should be able to find in your local yellow pages. DON’T GO TO YOUR LOCAL INSURANCE AGENT! The IAR can help you develop a plan to invest your funds in a way to fit your risk tolerance and meet your income goals. They may propose a purely fee-only, a fee-based and maybe a commissionable product solution for you. Don’t be scared away from any of these methods to compensate your advisor as he is a fiduciary and will have your best interest as the focus of the plan he /she develops.
As far as buying a “lifetime annuity” directly from TSP, this may not be the best way to proceed since TSP simply goes to one of their contract insurance carriers to buy the annuity. Your IAR at the RIA can do the same thing and will have more insurance companies to choose from. Annuity payout rates change weekly so let your advisor shop for you.
I hope this helps.
Jim2010-10-07 17:11, By: Jim, IP: [22.214.171.124]
L3: tsp one time withdrawal at riskVery well stated.
I’m always amazed at people who try to do everything themselves in financial and tax areas, and even legal areas ( like wills, powersof attorney on forms they get from the interrnet or a store)because they are reluctant to pay for advice (i.e. they are cheap). But, I bet they would never dream of doing medical or dental procedures on themselves.
Doing things incorrectly in financial and tax areas can be detremental to their financial health and well-being.2010-10-07 17:35, By: dlzallestaxes, IP: [126.96.36.199]
L4: tsp one time withdrawal at riskQuestion: In the original post, Jay indicated he could transfer the funds back to the TSP after his SEPP was concluded. Plans will not normally accept incoming transfers from separated employees. Is the TSP an exception, or is the OP incorrect on this assumption?2010-10-07 20:53, By: Alan S., IP: [188.8.131.52]