TSP Calculator

How much money can you safely withdraw from your Thrift Savings Plan during retirement? Use our free TSP calculator to estimate your retirement withdrawals. This handy tool will help you determine how much money you can take out each year without running out of funds.

TSP Calculator For Growth

A Thrift Savings Plan works similarly to a 401(k), 457, and 403(b) retirement plan. The TSP also shares the same contribution limits. Use this tool as a TSP calculator to project your growth potential, and it includes an employer matching option.

TSP Calculator For Estimating Withdrawals In Retirement

As you near retirement age, it’s common to start worrying about how you will support yourself financially. One option that can provide peace of mind is an annuity with a guaranteed lifetime withdrawal benefit (GLWB).

An annuity is an insurance policy that guarantees a regular paycheck for the rest of your life, even after the Thrift Savings Plan runs out. This can provide security in retirement, knowing you will have an income stream no matter what happens with your other savings. In addition, an annuity can help automate the TSP withdrawal process making it one less thing to worry about.

If you are nearing retirement and aren’t sure how to withdraw your money from savings, an annuity with a GLWB could be beneficial. This TSP payment calculator will also provide an accurate projection for future withdrawals if you retire later.

Note: You can purchase an annuity (with no tax penalties) with your Thrift Savings Plan, 401(k), IRAs, retirement accounts, investments, and cash.

What Is A Thrift Savings Plan (TSP)?

A Thrift Savings Plan (TSP) is a retirement savings plan for federal government employees, including military members. It is similar to a 401(k) plan many private companies offer.

The TSP allows employees to save money for retirement by making contributions from their salary, which can be invested in various funds with varying levels of risk and return. The funds offered by the TSP include both traditional and Roth options, which allow for pre-tax or after-tax contributions, respectively.

Advantages Of A TSP Account

Here are some advantages of having a TSP account:

• Low fees: TSP fees are among the industry’s lowest, meaning more money goes toward your retirement savings.
• Tax benefits: Contributions to a TSP account are made pre-tax, reducing your taxable income in the year you contribute. Additionally, earnings on your contributions grow tax-deferred until you withdraw them.
• Employer match: Some federal agencies and branches of the military offer a matching contribution to your TSP account, which can significantly boost your retirement income.
• Diverse investment options: TSP offers several investment options, including index and target date funds, which allow you to diversify your portfolio and manage risk.
• Portability: If you leave federal service, you can roll your TSP account to an IRA or a new employer’s retirement plan.

Overall, a TSP account can be a valuable tool for saving for retirement, offering low fees, tax benefits, employer matches, diverse investment options, and portability.

Disadvantages Of A TSP Account

While it has many advantages, there are also some disadvantages to consider:

• Limited investment options: The TSP only offers a limited selection of investment options, which may not be suitable for all investors. It may not offer the flexibility or diversity of investment choices that some people want.
• Withdrawal restrictions: There are restrictions on withdrawing money from a TSP account before the age of 59 1/2. If you need access to your money before then, you may have to pay a penalty.
• No matching contributions: Unlike some employer-sponsored retirement plans, such as a 401(k), the TSP does not offer matching contributions. This means that you are solely responsible for funding your account.
• Limited access to financial advice: The TSP does not provide financial advice or guidance to account holders. If you need help with investment decisions or retirement planning, you may need to seek advice from a financial advisor.
• Limited portability: If you leave federal employment, you can still keep your TSP account, but you may not be able to contribute anymore. You may also be limited in transferring or rolling your TSP account to another retirement account.

The TSP is a good retirement savings option for federal employees, but it may not be the best choice for everyone.

How Are TSP Withdrawals Taxed?

Depending on your location, TSP withdrawals are subject to federal income tax and may also be subject to state and local taxes. The tax rate depends on your income and your specific tax bracket.

TSP Required Minimum Distributions (RMDs)

TSP Required Minimum Distributions (RMDs) are mandatory withdrawals from your Thrift Savings Plan account that must begin when you reach age 73. RMDs ensure that you withdraw and pay taxes on a portion of your retirement savings over time. The amount you must withdraw each year is based on your account balance and life expectancy, as determined by the IRS.

Early Withdrawal Penalty

Withdrawing money from your TSP account before 59½ can incur an extra 10% fee in addition to regular income taxes. Fortunately, certain circumstances like disability, financial hardship, or life events may be exempt from this penalty.

TSP Withdrawal Comparison

Historically financial advisors recommend withdrawing 4% from your TSP and adjusting for inflation. However, the 4% rule has been debunked as a safe withdrawal rate. New research concludes as low as 2.8% is the new rule. The following table compares rolling your TSP into a new annuity with withdrawing income or utilizing an advisor.

Example: A 60-year-old retiree starts withdrawing immediately from their $1 million portfolio, they would receive:

• Annuity: Between $52,000 and $61,000
• 401(k): $40,000
• IRA: $40,000
• Roth IRA: $40,000

What Are the TSP Contribution Limits?

The TSP (Thrift Savings Plan) contribution limits are set by the Internal Revenue Service (IRS) and are subject to change yearly. As of 2023, the TSP contribution limits are as follows:

• The elective deferral limit for traditional and Roth TSP accounts is $22,500 annually. This includes any contributions made from your salary or wages.
• For catch-up contributions, the limit is $7,500 per year. This is available to participants who are age 50 or older and have already met the elective deferral limit.
• The total annual limit, including employer and catch-up contributions, is $66,000 annually.

It’s important to note that these limits are subject to change, so it’s a good idea to check with the TSP or IRS for the latest contribution limits. Additionally, some federal employees, such as military members, may be subject to different contribution limits based on their employment status.

Do You Get a Match on Your TSP Contributions?

Federal employees participating in the TSP (Thrift Savings Plan) do not receive an employer match on their contributions. Unlike employer-sponsored retirement plans, such as a 401(k), the TSP does not offer matching contributions.

Instead, federal employees are solely responsible for funding their TSP accounts through elective deferrals from their salaries or wages. The TSP offers traditional and Roth options for making contributions, and participants can choose to contribute a percentage of their salary or a specific dollar amount.

While there is no employer match, the TSP offers some advantages, such as low fees and the ability to invest in various funds with different risk levels. Additionally, federal employees may be eligible for other retirement benefits, such as a pension or Social Security, depending on their employment status.

TSP Investment Options

The TSP (Thrift Savings Plan) offers several investment options for federal employees to choose from. The investment plan options are designed to provide a range of risk levels and investment strategies, so participants can choose the options that best meet their retirement savings goals. Here are the TSP investment options:

• G Fund: This fund invests in short-term U.S. Treasury securities and is designed to provide a low-risk investment option with a stable return.
• F Fund: This fund invests in fixed-income securities, such as U.S. Treasury bonds, corporate bonds, and mortgage-backed securities. It is designed to provide a moderate level of risk with a potentially higher return than the G Fund.
• C Fund: This fund invests in a portfolio of large U.S. company stocks, such as those in the S&P 500 index. It is designed to provide a higher level of risk with the potential for higher returns than the G and F Funds.
• S Fund: This fund invests in small and mid-sized U.S. company stocks. It is designed to provide a higher level of risk with potentially higher returns than the C Fund.
• I Fund: This fund invests in international stocks from developed countries in Europe, Asia, and Australia. It is designed to provide a higher level of risk with the potential for higher returns than the other TSP funds.
• L Funds: These funds are designed to provide a diversified mix of the other TSP funds based on a target retirement date. Each L Fund has a target retirement year in five-year increments, and the mix of funds becomes more conservative as the target retirement date approaches.

Participants can choose to invest in one or more of these funds and change their investment allocations at any time.

TSP Annuity Vs. Rolling Into A New Annuity

If you are seeking a guaranteed monthly income stream, you might want to buy a life annuity, which would provide you with a monthly benefit for the duration of your life. However, there are HUGE disadvantages to the annuity the Thrift Savings Plan offers.

• Both annuities offer a guaranteed paycheck for the rest of your life or lifetimes.
• Both offer increasing payment options to help with inflation.
• The irrevocable TSP annuity requires you to give up control over your retirement savings.
• The TSP may not offer a death benefit, depending on your payout.
• TSP annuity owners will earn little to no interest along the way.
• Rolling the TSP into an annuity with a guaranteed lifetime withdrawal benefit (GLWB) will offer the following:
  • Control over your retirement savings
  • The ability to earn interest throughout retirement.
  • A lump sum death benefit to beneficiaries.
  • Possible long-term care benefits.

Next Steps

We hope our TSP calculator helps you estimate your retirement savings over time and paints a clearer picture of your overall planning.

Determining how to withdraw money from your TSP account in retirement doesn’t have to be complicated. With our free TSP monthly payments calculator, you can plan your withdrawals so that you know exactly how much money you can take out each year. This handy tool will help you maximize your retirement savings and ensure you have enough money for the rest of your life. So why wait? Contact us now for a quote, and start planning your retirement today!

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