TSP

It’s unlikely that you will spend down your TSP dangerously fast, but it’s possible that you’ll burn through it more quickly than you should. Image: MawardiBahar/Shutterstock.com

By John Grobe

Don’t spend it all in one place! I remember that as a smart-aleck remark from a person who had just paid given me a dollar or two. It also can apply to larger sums of money (perhaps even TSP and IRA money.

What if you have a TSP balance in the high six figures when you retire? It’s very unlikely that you will spend it all in one place, but it’s possible that you’ll burn through it more quickly than you should. You want to have a plan to spread out the income over your full retirement. There are a lot of ways to do that, including “the 4% rule”, purchasing an annuity, or taking payments based on your life expectancy – and we’ve had many articles in the TSP Investment Report on those strategies.

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You don’t want to emulate most Lotto winners. A Reader’s Digest® study found that 70% of Lotto winners spend or lose their winnings in five years or less. Pretty scary! Remember that your Thrift Savings Plan account is money that you have painstakingly saved for your retirement, and it should be spent just as painstakingly. Your FERS annuity and Social Security will not, by themselves, replace your pre-retirement income. You need your TSP and, perhaps, other savings such as outside IRAs to support your standard of living in retirement.

Did you know?
The week of October 16th was National Estate Planning Week. It’s only fitting that this reminder comes after the week has passed. Estate planning is one of the most commonly overlooked parts of our financial lives. We are inclined to say, “I’ll get around to it.” Well, if we live to our life expectancy, we will be likely to get around to it. If we die prematurely, or before having gotten around to it, we will leave our heirs in a world of hurt. Do yourselves a favor – review, update, or create an estate plan; your heirs will thank you for it.

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