How To Withdraw From Thrift Savings Plan Smartly

How to withdraw from TSP
by Scott R. Tucker // January 15 /

When you want to begin using your money you can initiate a TSP withdrawal from the TSP.gov website.  This new phase of beginning to use your money may cause concerns about ensuring you never run out of money in retirement.  A safe alternative to taking a TSP withdrawal is to transfer your Thrift Savings Plan to an Individual Retirement Account (IRA) so you gain more control of your money.  So we are excited to share a strategy to teach you how to withdraw from Thrift Savings Plan safely.

Can I withdraw money from my TSP without penalty?

There are a number of ways to take a TSP withdrawal without penalty.  Primarily this means taking "qualified" distributions after age 59.5.  However, you also have options to take early withdraws without penalty as long as you stagger the payments equally.  Contact us for more info on this option.  

Can I withdraw all my money from TSP?

Yes, as long as you don't annuitize your TSP payments you have access to the entire balance of your TSP account.  You must account for taxes owed and any early access penalties which are 10%.  This is one of the reasons locking up the majority of your savings into retirement accounts can backfire later in life.  

Conventional Military Retirement TSP Withdrawal Wisdom 

You might be saying to yourself, “OK, I have a certain amount of funds at my disposal from my TSP. If I plan on living 30 more years, I should plan to liquidate no more than 4% of my account’s value per year. Then, hopefully, with the market consistently turning up positive returns, such as the S&P 500’s 6.5% average, I could make my funds last.”

This conventional wisdom is why there is such a demand among senior citizens to become employed as greeters at Walmart. There simply is no guarantee that a withdraw from TSP or 401K, if left invested in the securities market, will not run out. For those all too many people who have the misfortune of taking distributions during a down market, a new source of employment is the only way to cover their needs.

But there is a solution that “They” do not want you to know about. When we say, “They,” we mean the  administrators of your qualified retirement account, and your “wealth advisers” at the big name investment advisory firm. “They” do not want you to know about it for one simple reason: if you employ this solution, less of your funds will be under their care, and their annual 1.5% fees will decrease. But you accumulated the funds in your thrift savings plans, 401k's and other retirement accounts to provide for yourself and your family, not to ensure profitable quarters for your wealth adviser or his firm.

Improve TSP Annuity Rates

Wondering how to withdraw from Thrift Savings Plan?  The solution is to transfer your TSP into a safe Fixed Indexed Annuity or an FIA. This is not your grandfather's retirement vehicle.  This solution provides a combination of security, income, and longevity unmatched in any securities market anywhere in the world. How? The answer is simple.

A “fixed” product is one that guarantees principle protection, backed by the full faith and credit of the United States Government. That guarantee is of the same validity as the FDIC insurance that your bank guarantees for your money. In short, the ENTIRE value of that TSP, when rolled into a FIA, becomes principle and is therefore guaranteed to NEVER experience negative returns again.

how to withdraw from thrift savings plan

How the FIA Provides Security

It puts these asset classes through the following 3-step process.

  • Step 1: Evaluation. The asset classes’ 6-month performances are evaluated. 
  • Step 2: Selection. The top performers are selected. 
  • Step 3: Weighting. The winners are weighted by performance and the index is adjusted accordingly. 

This 3-step process is repeated monthly in order to rebalance the portfolio, within which the cash value of the FIA grows. The annual performance is averaged, and based on the average performance, interest is credited to the now-principle-protected cash value. This index has averaged 6.3% annual rates of return to the S&P 500’s 6.51%, with 71% less volatility and a guaranteed minimum rate of return of 0%.

How To Withdraw From Thrift Savings Plan

Once a retiree decides to take distributions, the cash value is divided up into equal pieces. The older the annuitant is and the longer the funds have been accumulating, the larger each piece is. Based on the size of each piece, an annual payout starts coming into the annuitant’s bank account. Once the payouts start, the only way the payout stops is if the annuitant, or if he/she is married, both co-annuitants die.

Even if both co-annuitants make it to the age of 120, and completely exhaust the cash value of their funds, the payouts never stop. It is still the only way that a TSP account holder can beat the market simply by living.

Each retiree is a little different. Each TSP account holder has different needs and different priorities. Each FIA can be customized to account for these differences. To find out how to structure your own FIA, click the following link and you will be connected to one of our licensed professionals.

Scott R. Tucker is an author, speaker and the founder of US VetWealth, a lifestyle and financial consulting brand that helps US Military Retirees achieve more autonomy and work/life balance. He likes to say, "I help the 1% who serve our country become the 1% who influence It." A West Point graduate, serial world traveler, military financial expert, and entrepreneur, Scott brings valuable experience and insight to those who have sacrificed so much in service to our country.

Military Retired Pay O5 guide

FREE GUIDE

Navigate Your Retirement Pay and Benefits

Read our case studies to learn how much retirement income you could reclaim from SBP and re-invest by privatizing your military pension. (Updated for 2023)