Question
Hi Dallen. I listen to your podcast and I deliver mail every day. You’re awesome! My question is about the 4% rule on TSP. Do I withdraw it once a year, every six months etc. and do I do it at the end of each year or during the year? Thanks
Answer
The good news is that it doesn’t really matter how often or when you withdraw the money as long as you don’t take out more than the 4% allows (4% of your balance the first year and then ramped up with inflation after that).
If you want to take it out every month then that is completely up to you.
Question
I am 62 and still an active letter carrier. I started the Roth TSP just a couple of years ago as I was unaware of it although I’ve been in traditional TSP for 23 years. Instead of contributing to the TSP Roth, would it be in my best interest to get a Roth IRA? And can I do that? Are there dollar amount limitations?
Answer
A Roth IRA has one big advantage over the Roth TSP and that is not subject to RMDs at age 72. Because of this it often makes sense to have a Roth IRA at least in retirement.
That being said, you might as well open one right now to get a jump on the Roth IRA 5 year rule.
More information about this 5 year rule here.
But you will want to keep in mind that once you have income over certain limits then you can’t contribute directly to a Roth IRA. This year’s limits are here. If that is the case for you then you will probably want to use your Roth TSP.
Question
I am 57, still working, have 150k in f fund and 150k in c fund. I would like to take the money from the F fund, withdraw it and put it into an annuity of my choice. Is that possible without penalty?
Answer
If you retire at 55 or later then you can access your TSP without the normal 10% early penalty.
However, when you withdraw from the TSP you can’t choose which funds that withdrawal comes from. The withdrawal always comes out proportionally to what it is invested in.
So for your situation, half of your money would come out of the F fund and the other half from the C fund.
However, you would then be able to do an interfund transfer to get your TSP invested in the funds of your choice.
Once your money is out of the TSP then you can put it into an annuity of your choice but I would be very hesitant before doing so because most federal employees simply shouldn’t buy an annuity with their TSP funds.
