I am retired from Federal Service and am drawing monthly from my TSP account. When I retired I took a partial lump sum which prevents me from taking anymore withdrawls.
I find myself in an emergency situation that requires a large lump sum of funds to take care of. My question is: Can I rollover the remaining funds in my TSP account to a Roth or any oth type of fund that would allow me to continue taking monthly withdrawls and allow lump sum withdrawls if needed?
My other choice is to sell my RV so I hope to save my retirement toy.
Thanks for any advice.
Hi Major Del,
I have sent your question over to one of our CERTIFIED FINANCIAL PLANNERS from the ASK USAA forum but, I encourage you to contact our team of Financial Advisors here at USAA. They can be reached at 800-771-9960. Thank you.
Major Del, while I appreciate your dilemma, my primary concern from a financial planning perspective is that you have a handle on your income and expenses and are in a situation that is financially “sustainable.” I know you want to save your toy as you called it, but based on your question, I’m worried that doing so might not be a great move. So, my first advice would be to talk with someone about your entire retirement plan and make sure you’re on track. You’ll also want to talk to your tax advisor about the tax implications of your withdrawal plans.
Specific to accessing the TSP, here’s a link to the information the TSP provides on withdrawing your account. As you pointed out (and have already done), you’re allowed to make a partial withdrawal only once. Since you need another lump sum right away—and would like to be able to make non-periodic future lump sum withdrawals--along with monthly payments, the TSP doesn’t offer what you want.
Since you need a lump sum, one option to consider would be to transfer 100% of your remaining TSP to a traditional IRA (I’m assuming your account is traditional and doesn’t hold Roth contributions). By transferring the money directly to your IRA, there won’t be any tax implications or mandatory withholding (until you withdraw the money from the IRA). Once the IRA is set up, you’ll have the ability to set up periodic withdrawals or make lump sum withdrawals. You mentioned moving the money into a Roth IRA. While this is a possibility, 100% of the funds that you transferred into a Roth would be taxable as ordinary income—again, something to talk with your tax advisor about.
The TSP provides a list of questions you should ask before you move money out of the plan which have to do with expenses, costs and other important considerations. Good luck.
Prior to requesting an IRA rollover from a Thrift Savings Plan (TSP) account which is a retirement plan for military or civilian employees of the U.S. government, consider whether such rollover is appropriate for you. Although IRA rollovers may have certain advantages, TSP accounts have advantages you should consider before proceeding which include, but are not limited to, low administrative and investment expenses and, if you separate from government service at age 55 or older, you have penalty-free access to your TSP account funds. Additionally, you may want to consider maintaining at least a minimal TSP account balance because, in the event you want to transfer or rollover qualified assets to your TSP account in the future, you must have an open TSP account with a balance when your request is received by the TSP. You should consult your tax advisor regarding your specific situation to determine whether a TSP rollover to an IRA would be suitable for you.