Q. I appreciated your Feb. 4 article concerning the advantages of the Thrift Savings Plan vs. more costly private products. I am unclear, however, about the options (and their advisability) when it comes time to retire from federal service. Recognizing that rules allow distribution without penalty at 59½ and require some distribution from any IRA at 70, is continuation in the TSP an option which would allow the retiree to access the account as desired, or must the TSP account be moved to a private instrument?
A. I have written about this topic on more than one occasion. You may not access your TSP account at will. But you may maintain your TSP account for life, within the TSP’s rules. As an alternative to rolling the account over to any IRA, which is a painful thing to have to do, you may want to consider a one-time partial withdrawal to create an accessible fund outside of the TSP, and then a series of automatic monthly withdrawals to maintain that fund over time. The amount of the monthly withdrawals may be changed once each year to adjust to changing needs. This method takes some careful planning, but it may be worth the effort in the long run. I manage this system of withdrawals for many of my clients as a usual part of the planning and management process.