I started putting 7% into the TSP 2 years ago and am still unsure how good the TSP is. I am doing the L2020 plan and last quarter it lost $55. I know the market is slow now but I don't ever like losing. I plan on taking this money when I retire with 20 years around 2015 and maybe using it as a down payment on a house. Probably the last house I will ever buy and the last move I will ever make.

Are there any restrictions on taking the money when I retire and how much taxes will be taken?

www.tsp.gov

Go there, believe them, not us.

Been there, I was actually looking for opinions on the TSP as a whole.

Look down in the Topics on this page Check out the one "saving to buy a house and your answer may be there. Good Luck

I won't give you my opinion on TSP because it's biased, very biased.

However I read that you don't like loosing. What don't you like loosing? Priniciple you've invested in general? well then put it all in the G fund because it's the only one out of all 10 that has a positive rate of return always. Of course, inflation and taxes will eat away at your slow, low positive returns, so you will loose something in a way with this fund too.

The other funds have risk, credit, market and with the I fund currency risk; so losses can and will occur. The TSP is not a short-term investment vehicle. It is a long-term reitrment savings plan.

The L Funds are a professionally managed and pre-determined investment mix of the 5 core TSP funds. They are designed and named for the time horizon of the investment or the date closest to when you would need to use the money. So, the further away you are from using your investments in the TSP, the more risk in the beginning decades you can take. These funds are heavily C, S, and I very little in the F and G Funds. All of the funds shift gradually, each quarter of each year and become more conservative, so when you reach your time horizon the fund you are in will shift its investments and look just like the L income fund.

The fund is not designed to protect you from investment losses that it understood can and will occur over time.

As far as restrictions, the TSP let's you keep your balance in to accrue earnings without having to do anything with it until you are age 70.5. You can submit forms to withdraw your TSP account as early as your finance office reporting your separation to the TSP.

There is a one time partial withdrawal of a specific dollar amount you can take.

When you are ready to do something with the entire balance you may select a percentage of your balance to go to one, two or all three options:

Single payment - which can be transferred to a traditional IRA or equivalent public/private sector plan like TSP;

monthly payments - balance continues to accrue as payments are made, select a $ or ask TSP to compute your lifetime payments. Can change $ each year or request final payment of balance

TSP life annuity - lifetime payment package paid from contracted annuity vendor, with single or joint life options added on.

As far as penalites, which is what I think you are asking about, TSP is subject to the same IRC section as a 401(k), 413(b) equivalent plan. if you are not 55 or older in the year you seaparate or retire from an employer, and you choose a non-lifetime type withdrawal that is paid before the year you turn 59.5, there is the 10% penalty on amount received before 59.5.

If you are not going to truly retire when you leave the military, leave your TSP where it is or transfer it to your new employers equivalent plan. Keep transfering until you work for the employer you will separate or retire from at age 55 or older. The combined amounts paid from that plan (which include your TSP if you transferred it) are taxable income earned, no penalty because of the age you are in the year you leave.

Good luck with buying a house. TSP does have a loan program for you to use your money. But this is supplemental retirement income, you may not want to tap this money without looking at other options.

Good luck

tspczar
Thanks for the in depth response. So I'm basically paying 10% to receive my funds when I retire. That pretty much wipes out the gains I've made over my last 9 years in the Coast Guard. I understand the savvy in transferring it over to an IRA until I'm 55. I'm torn between buying a house when I hit 20 years and move back to my home state. With new lending practices demanding down payments of 20% and my only savings is the TSP I've got to find a way to get into a house. Like I said, it should be the last house I ever buy.

The house I'm in now was for no money down but I don't know if that's possible after this mortgage crisis.

Elbowgrease,

A clarification....why would you want to withdraw your TSP funds when you retire at 38 or 40 years of age? TSP is building a pension for your "real" retirement around age 60.

If you want a home buying fund, start that in a mutual fund or money market account.

Folks talk about getting their hands on their TSP account when they getout of the Coast Guard. It's a pension, not a general purpose savings account. On another post, one fellow calls it a "glorified savings account." It's not. It's a pension fund!

My opinion, which isn't any more or less valuable than anyone else's, is that TSP is a good deal if you're in it for the long haul. If the cost/value goes down this month, then maybe you'll be buying shares at a bargain next month. I think - I don't know but I think - over the long run TSP will give you a pretty good return.

The value of tax deferrment is debatable. If you live on your retirement and TSP alone, your net income and taxes will be lower so the tax deferrment now may be a good thing. But then, you may be collecting retirement pay plus a pretty good salary when you draw from TSP, which means you will be paying not only more taxes, but taxes on all of your salary and not just part like you will on active duty, so the tax deferment may not be such a good thing.

You raise a good point. Do folks realize that TSP is a pension plan? Which means they're in it for the long haul by its vary nature. Whether it stays within TSP, gets shifted to a traditional IRA, transferred to a 401(k), or moved into some other pre-tax retirement account it's intended to be retirement money.

It's sort of like people saying I'm going to start a 401(k) at my company so I can buy a new car next year.

It's a pension fund.

quote:

Originally posted by Brian_Jordan:
Elbowgrease,

A clarification....why would you want to withdraw your TSP funds when you retire at 38 or 40 years of age?

That's what I'm trying to figure out. At the time (2 years ago) I had no savings and was 31 years old and set to retire in 8 years. I just wanted to get something started easily. It was easy to go to the YN and fill out a form to take 7% out of my pay and the tax deferrment made it seem like it wouldn't hit me too hard in the net pay department. So I chose the L2020 thinking that around the year 2020 I would use it.
I'm sure I'm not doing it right, however my thinking at the time was get the house when I retire then I'm set with a place to stay for the rest of my life. My next thought was to really start putting away for my "official retirement" at that point when the kids will be 18 and gone.

I see what you and RW Lucas are saying though, that TSP may not be the best choice for a 10 year plan. What else is tax deferred? I don't really want to see much of a hit in the "net pay" department because until my wife finishes school we need our money.

For retirement take a look at the Roth IRA, I believe that it is not taxed at all if not drawn until you are 59 1/2, provided you've had it for 5 years.

If that 20% is daunting for buying a home, take a look at a VA loan. Nothing down is very nice and it's easy to get your certificate of eligibility.

I use mutual funds for my play money after I retire from the Coast Guard and a Roth for once I retire for good. Great advice that is often overlooked Brian - TSP is a retirement fund, not a play fund. Nearly all investments will not produce much after only 10 years. I've been investing for 15 years and it's just now starting to take off. Gotta love the miracle of compound interest.

For a great book, even if it is a little outdated in some areas, I highly recommend "The Wealthy Barber". It's easy to read and has some great information.

Best of luck
Jon

quote:

I see what you and RW Lucas are saying though, that TSP may not be the best choice for a 10 year plan. What else is tax deferred? I don't really want to see much of a hit in the "net pay" department because until my wife finishes school we need our money.

As many investment ads mention, your money can still grow while you retire. Depending on your age now, that TSP can stay working for you up until 70 years, then you have to start removing it. Possibly you could even keep it in a more aggressive mix longer?

One of the best benefits for us is the VA loan. It helped us get into a house, without tapping into our savings. We made sure to not just buy a house we could afford on an active duty salary, but one that retirement pay could possibly swing. This became very important when all our plans for staying until 30 ended with a family illness. Those savings have paid off for unplanned immediate needs.

There is a fee you pay to the lender for the VA loan. We paid $4300 on a $160K loan. Also, our lender offered a bi-monthly payment plan. This will surrender the 30 year mortgage in 26 years. Of course, one extra "principle only" payment per year works wonders too.

n1dp:

Regarding TSP, the law requires that once you are separated from federal service and age 70½ you need to make a full withdrawal request from TSP.

That does not mean you need to take all of it out. One of the withdrawal options is to request monthly payments from your TSP account. You may request a whole dollar amount, which you can change each year; or you can request the TSP compute your monthly payments, which are recomputed each year based on your age, corresponding uniform table life expectancy factor, and balance. The only requirement is what you receive by the end of the year is equal to the IRS required minimum distribution for your age that year.

While you are receiving monthly payments, you may invest your balance in any of the TSP funds; your check each month is cut based on your pro-rata balance among the funds as the checks are cut. So yes, while receiving monthly payments in your 70's, you can take on the greatest amount of risk and invest your TSP account in that (those) funds.

Also at anytime you may request a final single payment of your remaining account balance. In case you need it for nursing home expenses, or that last big trip to Vegas.....

quote:

Also at anytime you may request a final single payment of your remaining account balance. In case you need it for nursing home expenses, or that last big trip to Vegas.

What happens in Vegas, stays in Vegas, cuz I'll be too old to remember!

Wish we had TSP back in 1980!

well i got my annual mailing on tsp and they are trying to make it so everyone in boot camp is signed up and automatically put into the life cycle funds. i think this is going to be great. it will help people like me who try to convince an 18 yo to part with $100 a month so he will be rich when he is 60.
i am in the TSP and also have a ROTH IRA, money market account and online investment account. if you start small and use half of each of your pay raises (annual, advancement and longevity) you will be amazed at how it all adds up.

AND IT IS NEVER TOO LATE TO START INVESTING IN YOUR FUTURE!!!

we put 10% into the TSP.
10% into the ROTH
10% into the MOney market
10% into the general savings

HIS PAY-

Mine :
10% into my Roth
10% into my general savings
10% into my goal oreinted savings ( vacay to Ireland for 10 yr wedding anni.

we own our own home.

Dh will retire from the CG in 7 yrs.

I have our retirement plan set up so that when he retires at 23 yrs in service, he will still work, 10 yrs later age 54 he will be able to retire completely. And as we get older we will aquire MORE income, not lose it.

so all is possible with a strict budget and lots of sacrifce.