Description: In the article which centers on tsp login, the author talks about some basics of the Thrift Savings Plan. The Thrift Savings Plan is a tax-deferred defined plan of contribution. It is very similar to a private sector 401k plan. It serves as an investment vehicle for an individual’s retirement funds.
My name is Sean Lonergan. I’m a partner with ifasi financial group in Tampa Florida, through our tutorials and literature pieces, we offer generalized information on some of the topics that we cover, today we’re going to be talking about the TSP, the Thrift Savings Plan.
401k or 403b and 457 plan are employer sponsored retirement plans, along with a 457, TSP gets put by the wayside because it’s not talked about as much, when we first sat down with some of our clients, our clients had TSPs and didn’t even know what they were, the benefits of them and the negatives of them.
So through this article we’re going to learn the basics of them, this is employer sponsored retirement plan, you’re getting here qualified and non-qualified, we help you understand the difference between the two, on the qualified side, it’s a pre-tax.
Your money goes in, you put it in a lump sum, you contribute, it grows over time, you’re not paying taxes on it upfront, so that’s where it’s tax-deductible, another upside to a thrift savings plan is that it’s tax deferred growth, you put your money in, you let it grow over time, it accumulates, you has that compound interest that compounds on each other.
For the 20, 30, 40 years you’re working, your money is growing, when you’re ready to take it out, it’s a big lump sum of cash rather than having taxes taken out every year, most of the companies are going to long for a match, this is beneficial to the employees because it’s free money.
If they sit you down on your first day and say that we’re going to give you a 5 percent match in your TSP, if you put in 5 percent of your paycheck, they’re going to match you to 5 percent, if you put in 3 percent, they’re only going to match you to 3 percent.
You decide to put in 10 percent, they’re only going to match you to 5, so it’s important not to put in more than what they’re going to match because they’re only going to match it to a certain point, but it is beneficial because it is free money if they offer a match.
They also have what’s called a fifty five rule, what that means is if you’re eligible to leave service to retire in age 55 or later, that 10 percent income tax penalty is waived, so you’re not going to get here with penalty tax if you’re eligible to leave at 55 or later.
Like anything else with a 401k, an IRA or 403b, there are downsides, first downside is that it’s fully taxable, because you’re getting a tax deduction upfront, your money’s growing over time without getting taxes taken out, you’re going to pay taxes on the back end.
Tax brackets are at all-time lows, so people that retired around this time are reaping the benefits because they’re not paying any taxes on the way out, but for people that are 20, 30 even 40, the tax brackets are only going to go up, so they’re going to pay taxes on the back end.
Another thing is that there are limited funds like a 401k or 403b, the company decides to give you five or six funding options, the reason they only give you five or six is that the more funds they have, the more expensive it is for the company to have those investment options.
The downside of the limited funds is that they may be very generic, they may not perform where you have other options such as an individual retirement account, an IRA to go down the street to Bank of America and get 300 funding options for about the same price.
The biggest downside to a TSP like a 401k or 403b is the 59 and a half rule, if you’re not eligible for that 55 rule, if you’re not eligible to retire in the year age 55, if you’re still working by the time you’re 56, 57, you can’t retire until 61, 62 and you want to touch that money, you’re going to get hit with a 10% penalty tax.
That’s on top of your income tax, if you have $100,000 in your TSP and you’re 58, you can’t touch that money, you’re retiring at 61, something happened, you want to take that money, it’s a 10 percent penalty, let’s hypothetically say that you’re at a 30 percent tax bracket, that’s $40,000 that Uncle Sam’s taken out.
You’re only walking away out of that a hundred thousand with 60 thousand after taxes, most of the information we have is generalized information, your situation is going to be different from everyone else’s in regards to your family, your occupation or your retirement financial goals.
To get help with your specific situation, call one of our specialist toll-free, we do video conferencing, we talk over the phone, we’re easily accessible through email, we mold your situation into a designated plan, thanks for reading.