TSP and monthly payments


Q. I recently retired and would like to start taking monthly payments from my TSP account. Unfortunately, in 2013 I started putting a small portion of my contributions into the Roth option. This money will not pass the five-year test until 2018. There isn’t much money there, but I don’t want the hassle of figuring out the tax penalty and would prefer to grow the Roth in a separate account. I called TSP and got no help figuring out options.

I read your solution about transferring almost all of the account out of the TSP, separating them, then transferring back the non-Roth portion. If I correctly understand TSP-77, there is an option to pay the Roth portion of the monthly payment straight into a Roth IRA outside of the TSP in sections XI and XII of that form. I have heard not discussion of that option around the water cooler — is it a viable option? I read something that you would have to expect that the Roth portion would have to be expected to be paid out in 120 payments and you can’t use this option for monthly payments based on life expectancy.

A. See Form TSP-70 for your options for handling monthly payments. TSP-77 is used only for partial lump-sum withdrawals. You’ll find that you may have the Roth portion of your payments transferred to a Roth IRA to avoid recording a distribution. The 120-month rule that you are citing affects only the mandatory tax withholding requirements for the Traditional TSP money withdrawn and does not affect Roth payments.


About Author

Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

Leave A Reply