You Have Options with the TSP

Guest post by David Fielder.

David Fielder is owner of Postal Benefits Group

Click below to see all of Davids’s Guest Posts.

The TSP is an excellent savings vehicle while you are working and for FERS employees there is matching on up to 5% of your contributions. However, when you get closer to retirement it is important to understand your options to ensure you and your family receive the full benefit of the TSP.

Most employees do not understand the role of the TSP in their retirement. The vast majority of employees go through the retirement process and ANNUITIZE their TSP because this is most common option recommended by Shared Services.

What happens when you Annuitize?

First, when you annuitize you are giving up your cash in exchange for a monthly check. Once you make this decision you no longer have the cash. This can cause serious problems if a family emergency arises. Second, your money no longer grows. When you annuitize your TSP an interest factor is added at the beginning and it never changes even if interest rates improve in later years. The last problem with annuitizing your TSP is the most significant. When you annuitize your TSP you are disinheriting your heirs. Once you convert your TSP to monthly payments you are essentially turning your TSP into another pension. Think about your pension for a minute… The only two people that can be paid from your pension are the employee and spouse. When you annuitize your TSP you are guaranteeing your kids will never see a dollar. Shared Services does not explain these implications and as a result most employees make this catastrophic mistake.

What should you do?

Our goal in writing this article is to make sure you understand these implications. The best thing a Postal employee can do with their TSP is roll it over into a private IRA where there are no tax implications, their money is protected and most importantly you can name as many beneficiaries as you want and ensure your hard earned money stays in the family. You can take advantage of this option at retirement OR if you are 59.5 or older you can rollover your TSP while you are still working and still receive matching on your future contributions.(if you are a FERS employee).

Postal Benefits Group has been serving thousands of Postal employees across the country through its retirement seminars, and their book THE POSTAL BOOK. If you have questions about your TSP and other options please feel free to contact us.

 

Guest post by David Fielder.

David Fielder is owner of Postal Benefits Group

Click below to see all of Davids’s Guest Posts.