Has anyone cashed out their TSP? Is it worth doing?

SFC Private RallyPoint Member — Mon, 08 Jan 2024 15:11:16 -0500

TSP

Response by CAPT Kevin B. made Jan 8 at 2024 3:45 PM

CAPT Kevin B. — Mon, 08 Jan 2024 15:45:18 -0500

It's of better service to transfer it to commercial sector at age 59.5. For the same risks, you can reliably pull in 2% more. Why? TSP has a rather small mix and match options. Commercial has thousands. A financial advisor can manage the assets to optimize returns and otherwise establish a reliable cash flow to you. Everyone hits a point of either not wanting to work anymore or unable to work anymore. Typical retirement plans don't cover everything so you have to have multiple streams. TSP, 401, etc. are just part of the picture.

Response by COL Randall C. made Jan 8 at 2024 4:27 PM

COL Randall C. — Mon, 08 Jan 2024 16:27:29 -0500

You're asking a question that amounts to "what's the best color". Personally, I just left it in place.

My opinion is that it's no better or worse than many out there*, as it really depends on your investment approach (Are you conservative? How much risk tolerance do you have? etc.).

Where it does 'shine' relative to other investment vehicles is that the fees for TSP are almost 1/10th of the average for the other plans*.
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* https://www.tsp.gov/fund-performance/
* https://www.investopedia.com/terms/t/thrift_savings_plan.asp

fund-performance

Response by 1LT Private RallyPoint Member made Jan 10 at 2024 8:32 AM

1LT Private RallyPoint Member — Wed, 10 Jan 2024 08:32:31 -0500

Is free money over time worth banking on? Yes, yes it is.

It's a solid retirement option; it's competitive in the market. The fee we are charged to have the TSP programm and its employees handle our accounts is also on the lower end of comparable plans in the civilian sector. Also, the 5% matching is great and can be counted on.

If you don't take my word for it, take it from the full-time Chicago stock-broker and part-time Army Finance officer who instructed my class during our last year of ROTC. He gave everyone in the BN a rundown on TSP and made a point to say that if we are not contributing our max ammount to the TSP every year as active duty officers then we're idiots.

Response by MAJ Ken Landgren made Jan 12 at 2024 3:53 PM

MAJ Ken Landgren — Fri, 12 Jan 2024 15:53:20 -0500

You mean take the money before retirement age?

Response by COL Dan Ruder made Jan 15 at 2024 3:07 AM

COL Dan Ruder — Mon, 15 Jan 2024 03:07:25 -0500

TSP contributions are not taxed going in but you will be paying that income tax on any TSP withdrawals you make. You will report those withdrawals (or your 'cashed out' TSP) as income on your federal and state tax filings, hence your tax bracket could easily change for that year. So, pay attention to any changes in the income thresholds that inform the federal tax brackets. The thresholds change in 2024 (for the better) and will likely change again in 2026 (for the worse). I began in 2023 to move a portion of my TSP into my ROTH IRA, paying the income tax now so the funds can grow tax-free and take advantage of the market lows before it rebounds from this 'rolling recession' we've been in.