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What To Do With Your TSP When You Retire

| February 20, 2020

TSP allocations - limits options, secret investment society
TSP distributions in retirement.  Major challenge, you can’t pick which fund money comes out of. If you liquidate, it does so proportionally. This means if market is down, you’re selling at worst time, and if market is up, you get rid of the ones that still have growth potential. 
Better tax planning - most ppl think they’ll be in lower tax bracket but in my experience most are in the same bracket bc of their pension. 
Another challenge is if you’re a FERS employee retiring with the SRS special retirement service payment, there’s a 9-12mo gap that OPM make you wait until they figure out your full pension payment. After they figure it out, they will write you a lump sum check for the payment that they missed in the SRS. 
The challenge with this, is that the lump sum is fully taxable as income for the year. The employee will receive a lump sum that is big enough to push him into a higher tax bracket, especially if they had been drinking with drawls from there TSP or IRA in the meantime. If you get bumped into the next tax bracket, it makes your tax liability much higher, so special planning needs to be done if you fall into this category.