A breakdown of the four options federal employees have for their TSP when they separate from government service: cashing it out, annuitizing through the government, rolling it into an IRA, or leaving it in the TSP, along with the trade-offs of each and why working with a fiduciary advisor matters when deciding.
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When you separate from service from the government regarding your TSP, you have four options.
You can cash it out. Some issues with cashing it out: paying unnecessary taxes and possibly penalties.
The second option is you can annuitize it through the government. With that, you turn over the money to the government in exchange for a monthly annuity for your lifetime, or potentially for your spouse's lifetime. Potential issue with that is you give up control of that principal.
Third option, you can roll it over to an IRA. IRA is an individual retirement account. With that, you have unlimited investment options. You can invest in stocks, mutual funds, gold, Bitcoin, CDs, money market. You can be as aggressive as you want, or as conservative as you want, or anywhere in between.
The fourth option, you can leave it in the TSP. You can leave it exactly where it is. You are not forced to take the money out when you separate from service. It's lower cost, but you're limited on your investment choices.
The most important thing to do is to have a good plan in place. Every plan is going to be unique to the individual. That's why we suggest working with a professional fiduciary advisor to help you formulate that plan and put that plan into motion as you transition into your next phase of life.
We're here for you. Give us a call if we can help. Visit us at federalretirement.com to set up a free no obligation consultation. We're happy to set up a phone call or Zoom, whatever is going to work best for you.
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