Your TSP: Is there action after retirement?
Friday - 4/17/2015, 2:30am ET
The federal Thrift Savings Plan was setup as a 401k style investment option for federal and postal workers, and members of the uniformed services. Many experts consider it the best of the best because of its lowest-in-the-business administrative fees, the 5 percent government match and the never-has-a-bad- day super-safe G-fund Treasury securities investment option.
A growing number of investors (4,167 at last count) have TSP accounts worth $1 million or more. One person has four times that amount.
Some of the TSP millionaires transferred money in when they joined the government. But the majority are believed to be homegrown, career feds.
Closing in on the millionaires club are another 21,458 feds with accounts worth between $750,000 and $999,999. For the numbers, click here.
Many retirees with TSP accounts wonder why they can't continue to invest in it. Here's the official explanation from Kim Weaver, director of external affairs for the Federal Retirement Thrift Investment Board:
"The TSP is basically a 401(k). Like 401(k)s, the TSP is a retirement plan set up by an employer (the federal government). It is a way for you to defer compensation to build up your retirement savings and get significant tax benefits while you are working.Here are the rules for 401(k)s, which are also true for the TSP:
If you switch jobs, you have three options for what to do with the vested portion of your 401(k) account. The following outlines your options and the tax implications for each:
- Leave the money: You can leave your money where it is — and taxes won't be due until you withdraw money from the account.
- Roll the money into a new plan or IRA: You can roll over your 401(k) into a rollover IRA account or into your new employer's 401(k) plan. If you do a direct rollover — have the money transferred directly into the new account — you won't owe taxes until you withdraw money from the account.
- Cash out: If you elect to take your money out of the 401(k) and not roll it over into a rollover IRA or another employer-sponsored retirement plan you will owe all applicable taxes. You will also owe a 10 percent early withdrawal penalty unless you leave your company during the year you turn 55 or later.
So, (federal retirees) are not being treated any differently than any other employee who has access to a 401(k) ... they can still roll money into the TSP if they leave federal employment, if it's the right kind of money. If he/she gets a 401(k) with the new employer (and subject to the rules of his new plan), he can roll his 401(k) money into the TSP."
Posted by: sarah_oz@yahoo.com
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