TSP when retiring-- keep it or move it?

[Anonymous]

I know that when you move TSP to Fidelity or Vanguard or the like, you have more investing options and the ability to do RMDs out of specific funds, which is not the case with TSP.

I remember some past posts on DCUM about TSP G fund being something useful/valuable. If I could keep my short term "bucket" of cash in TSP Gfund and only draw from it when stocks are down, that would be great. But, I understand that you have to take RMDs out of each type of retirement plan, so I couldn't just take RMDs out of 401k or IRA, and not out of TSP (G fund).

So, my question is whether there is any reason to keep money in TSP after retiring.

[Anonymous]

The expenses with TSP are very low, lower than you can usually find elsewhere. So if you'd be moving to something roughly equivalent at another company, e.g., a S&P index fund, your returns will be slightly better through the TSP because of the low expenses. If you want to invest in something the TSP doesn't offer, then that's an obvious reason to move your money elsewhere, but think twice before doing so - TSP options represent a fairly varied and sensible range of investment choices; others are likely to have more volatility, higher expenses, or other drawbacks.

[Anonymous]

Op here. Not being able to choose which fund to withdraw from for RMDs is a major negative.

[Anonymous]

The G fund will never go down in value. It is unique and created by Congress to be the only U.S. security protected from ever going down. So it is extremely safe. It also does not go up by a lot either. I would not buy the annuity. I would put progressively more into the G fund and take RMDs. The G fund money and any Roth investments would be the last money you spend in retirement.

[Anonymous]

Anonymous wrote:Op here. Not being able to choose which fund to withdraw from for RMDs is a major negative.

I am a retiree from Federal Government. I moved my TSP to IRA per your RMD concerns. The fee difference between TSP and Fidelity or Vanguard is a minor issue.

[Anonymous]

Anonymous wrote:Op here. Not being able to choose which fund to withdraw from for RMDs is a major negative.

Why does that matter? You could just take your distribution and then immediately rebalance. So if $10,000 came from the C fund and $10,000 came from the G fund, but you wanted $20,000 from the G fund, you would just move $10,000 from the G fund to the C fund the same day, right?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Op here. Not being able to choose which fund to withdraw from for RMDs is a major negative.

Why does that matter? You could just take your distribution and then immediately rebalance. So if $10,000 came from the C fund and $10,000 came from the G fund, but you wanted $20,000 from the G fund, you would just move $10,000 from the G fund to the C fund the same day, right?

The point is not to be forced to sell the C fund when it's down. If you leave cash in G and move your S&P index funds to Fidelity or whatever, you don't have to sell when you're down, but take G fund cash when you need it instead.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Op here. Not being able to choose which fund to withdraw from for RMDs is a major negative.

Why does that matter? You could just take your distribution and then immediately rebalance. So if $10,000 came from the C fund and $10,000 came from the G fund, but you wanted $20,000 from the G fund, you would just move $10,000 from the G fund to the C fund the same day, right?

The point is not to be forced to sell the C fund when it's down. If you leave cash in G and move your S&P index funds to Fidelity or whatever, you don't have to sell when you're down, but take G fund cash when you need it instead.

DP. What’s the big deal? It’s only a day until it’s replaced. Just as likely that C loses more in your scenario as that it rebounds.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Op here. Not being able to choose which fund to withdraw from for RMDs is a major negative.

Why does that matter? You could just take your distribution and then immediately rebalance. So if $10,000 came from the C fund and $10,000 came from the G fund, but you wanted $20,000 from the G fund, you would just move $10,000 from the G fund to the C fund the same day, right?

Because the process you described doesn't work for TSP withdrawals. If you want $20k out of the TSP, you cannot choose to take it out of the G fund. You would have to move ALL of your money to one fund, request the withdrawal, then move it all back to the allocation you want. Otherwise, if you want $20k, they are taking it out of ALL of your funds such that the total is $20k withdrawn. I would have to do this maneuver every time I want to take a withdrawal.

Ideally, I would keep my short-term money in the G fund, and have all of my equities in Vanguard 401k. Then when the market was low, I'd pull RMDs from the G fund, and when the market is high, I'd pull from the Vanguard equities. But, under current law this is not possible.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Op here. Not being able to choose which fund to withdraw from for RMDs is a major negative.

Why does that matter? You could just take your distribution and then immediately rebalance. So if $10,000 came from the C fund and $10,000 came from the G fund, but you wanted $20,000 from the G fund, you would just move $10,000 from the G fund to the C fund the same day, right?

Because the process you described doesn't work for TSP withdrawals. If you want $20k out of the TSP, you cannot choose to take it out of the G fund. You would have to move ALL of your money to one fund, request the withdrawal, then move it all back to the allocation you want. Otherwise, if you want $20k, they are taking it out of ALL of your funds such that the total is $20k withdrawn. I would have to do this maneuver every time I want to take a withdrawal.

Ideally, I would keep my short-term money in the G fund, and have all of my equities in Vanguard 401k. Then when the market was low, I'd pull RMDs from the G fund, and when the market is high, I'd pull from the Vanguard equities. But, under current law this is not possible.

It does take an extra transaction, but not necessarily the one you're describing. You do the withdrawal, you get $20,000. But your C fund now has $10,000 less than you want in it, so you at the same time move $10,000 from your G fund to your C fund. You sold at a low price but you bought it back the same day at the same low price, so nothing changed. Maybe the transaction takes a day, so you get the next day's price. Not a huge deal, seems to me, if staying in TSP has other benefits. I'm not sure it does, but this would be the way to make it work.

[Anonymous]

Roll it over.

[Anonymous]

Anonymous wrote:Op here. Not being able to choose which fund to withdraw from for RMDs is a major negative.

RMDs probably don’t kick in for you until 75 and then they are 4%. I really wouldn’t let that drive your decision making here.

[Anonymous]

I have half my retirement in TSP...left it there 2003 with about 12 years of maxed out contributions.
The other half is in TIAA.

I had TSP in L2020 and then put it in G because I was 70. Started RMDs 2 years ago. It performed better in the 2008 recession than TIAA. I am very pleased with it.