#86: Thrift Savings Plan with Kim Weaver

Full Episode Transcript
With Your Hosts
Micah Shilanski, Tammy Flanagan and Kim Weaver

 

Micah:  Welcome back to the Plan Your Federal Retirement podcast. I’m your host, Micah Shilanski, and with me as usual is the amazing Tammy Flanagan but in addition to the amazing Tammy Flanagan, Tammy was able to get someone from the TSP with us to answer some great questions. So special warm welcome to Kim Weaver, who is the Director of External Affairs at the Federal Retirement Thrift Investment Board. Kim, thanks for being here.

Kim: Thank you for having me.

Micah: Tammy, thanks for getting all this set up and having Kim join us and in that invite, I really appreciate it.

Tammy: Yeah, I’m really happy that we can have her on board. I feel like we’re very privileged to have this opportunity to hear some insider information from the Thriftt and to really get some questions with some straight answers. Because, you know, we hear so much going around and so many people talk about the TSP that we want to be able to share some information that’s very truthful and very upfront. So this is a great opportunity for our listeners.

Micah: You know what, when we were kind of pre-gaming this, talking a little bit in advance, you know, we were talking about how the TSP is a great part of the overall plan, right? Have a piece of the overall retirement that you have to look at, but it’s a very important piece, and it’s a bit of a unique piece in my mind because this is where I think some people make mistakes, and Kim, feel free to push back on me if you disagree, but people view it as Oh, it’s just like a 401k Oh, it’s just like an IRA. And while they have some of the same components, the TSP is quite unique for federal employees. And you really have to understand the rules in that how you can best utilize that for your benefit. So, I’m excited to talk about some of those questions.

Kim: Okay doke. Can’t wait.

Micah: Fantastic. Tammy, do you want to kick us off? I should say well, Kim, before we start, anything else you want to add?

Kim: No, I agree with you. The TSP is as you know, has been said since it was created as part of a three-legged stool. And you have to not only look at your three legs of the stool, but if you’re married, your spouse’s assets, everything has to come together for you to understand what your retirement plan is going to be. And that’s the best, clear way to know what you’re going to have in retirement.

Tammy: Yeah, that’s right. Oh, yeah. Two things to that little introduction. The first one is I heard this. Within the last week or two, someone said that a lot of federal retirees can basically pay their bills using their FERS basic benefit their Social Security benefit that might cover their living expenses, but it’s the TSP that makes retirement worth living. That makes it so that you can take the trip so that you can help the grandchildren so you can live your life in a financial security than then you would have had otherwise. So it’s so important to have that because we don’t ever want to have to say we’re living on a fixed income or we can’t go out to dinner because we don’t have the extra funds. So the TSP really does make that possible. But the other thing about the TSP is that it is part of that three-legged stool, and for some, in fact, even remembering way back to when the FERS program first started in the 1980s. I remember seeing a diagram or something showing that you had the FERS basic benefit the TSP and then the Social Security benefit has kind of three equal parts. And we find out that they’re not always three equal parts. In fact, for somebody who’s working at a higher salary, their Social Security benefit can actually be a smaller replacement of their income because of the tilt to the Social Security formula. So I always impress upon our Gs 13, 14, 15 SES, how important it is to contribute as much as possible to their TSP account to kind of offset or counterbalance that tilt to the Social Security system. So I think that’s another important factor. That people need to keep in mind as they plan their retirement. Do you think that’s true?

Kim: Oh, wait, it’s not only true, it’s the way it was designed back in 1985. There’s we have it a blown-up copy in our office of the Congressional Research Service, estimates of and diagram of how for lower income in participants, the more of their income is going to be replaced by the defined benefit and Social Security and smaller part but TSP and the inverse for higher wage earners. That was the way this system was designed. 

Tammy: The theory was lower wage earners didn’t have as much money left over to save they were living paycheck to paycheck. But in theory, this is where the theory might fall apart for some of our higher wage earners, that there’s money leftover at the end of every two weeks to set aside for retirement. That’s the struggle some people have, but I think the numbers go to prove the people are saving in thrift. I mean, what is that balance we have in there today? Is it getting closer to a trillion dollars yet?

Kim: Not yet. It’s when we have as of July $814 billion assets under management, which is you know, a nice chunk of change, I would say and our participants the other thing is, I would say that it’s important to know that almost 87% of FERS employees are contributing the full 5%. Because what that means is they’re not leaving free money on the table. Right? And that’s one of our educational points. For any employee at any income level is that if you can afford to contribute 5%, you’re getting 5% back, you’re literally doubling your retirement savings. And so it’s a messaging point that we hit frequently. And the numbers show that it is in fact, resonating.

Micah: I’m going to add to that it’s not just free money, you’re leaving on the table. This is your benefits it’s your money, right It’s like not cashing a paycheck. So you got a paycheck out there, and you’re choosing not to cash it by not putting in that 5%. So yeah, I’m I’m all about that. That’s the we don’t give investment advice from a platform right because everyone is different except for that’s the one thing I’ll just say constantly. Everyone should be putting in at least 5%. We can have discussions after that. But yeah, you’re doubling your money.

Tammy: It’s a deferred 5% pay raise, is the way I look at it.

Kim: Oh, that’s a good way of putting it.

Tammy: Although we don’t like that delayed gratification. So we’re going to use that for a lot of people but money that’s still there. It’s your money. It’s not like you’re giving it to somebody you’re putting it in your TSP account. It’s your bank account.

Kim: Right? And under the law, it is your it’s your account, righ?t We hold it in trust for participants, it is protected for each individual participant because it’s their money.

Tammy: Yeah, and I think the other thing to mention that some people misunderstand is that when you get money in your account, you’re getting matching funds, that’s your honor percent immediately the only thing that has to be invested is what can the 1% that do.

Kim: Yeah, the agency 1% automatic, then every two or three years depending on which system you’re in. Okay, yeah.

Micah: Okay. Well, we’re talking a little bit beforehand about distributions. And this is something Tammy and I kind of talk about a lot on the podcast is, you know, we talked about cash flow, knowing where your money is going to come from what your net benefits is always something good to chat about, but Kim, let’s just kind of talk a little bit about the distribution options beforehand. So what’s the most and just because we’re going to talk about the most favorite or the use the most doesn’t mean it’s right for everybody, right? For you from what you guys see from the TSP office? What do you guys see is kind of the most frequent distribution option.? 

Kim: The most frequent distribution option hands down are monthly payments, which means you come and you say, I want, there are two ways of doing it. You come, and you say I want you to use the IRS chart. It’s not the words you’re going to be using to us, but you give us payments based on our life expectancy. And then we use the IRS actuarial chart, and we recalculate that each year. As you get older, your balance fluctuates. And we adjust those life expectancy payments. That’s one way to set up monthly payments. The other way is for you to say, we were also talking before the show that this is, this is your money to have. You don’t want to be not able to go out and have dinner. So you know, splurge little. So you can say I want 500 a month I want $1,000 a month, whatever you believe is what you need. And one of the things that I think is really misunderstood and I want to be really clear about is if somebody is taking a monthly withdrawal, and $1,000 a month and so we’re going to send you $12,000 that year, if you happen to be of an age where you would have to get a required minimum distribution, we will send you that additional money in December. So that you are not penalized. You’re, you don’t have to worry at the end of the year that you need to make an additional withdrawal to make up that money. We will affirmatively do that, which is from a lot of IRAs and 401 K’s.

Micah: So Kim what I heard so for example and this let’s say that you’re taking up again, that 12,000 a year with your RMD that required minimum distributions. So now it’s changed, right? If you’re over 73, and you have this RMD requirement, and let’s say it’s $18,000 just for easy math, so they’re getting that $1,000 a month as a gross distribution in December is that two different deposits you’re gonna give them or you’re gonna give them the $1,000 a month plus the extra 6000. Or how does that work?

Kim: Two different deposits, because they’re processed in two different transactions.

Micah: Perfect, that makes tons of sense. So then you’re still gonna meet that RMD, so if you’re doing monthly withdrawals, whether it’s life expectancy that’s already calculating RMD in there, or if you’re just doing a flex dollar payment, you guys are going to make sure that RMD gets processed. Now, one of the benefits on waiting on an RMD towards the end of the year pro and con with this is sometimes, Congress changes their mind and says you don’t have to have an RMD this year, right? We saw that during COVID. And so imagine we saw it a few years before that, too, is that the RMD was five, six years before that, but there was RMDs were suspended for a year, and you don’t have to take them. So that is a nice benefit of doing the distributions that way.

Tammy: Yeah, rather than splitting up completely evenly throughout the year.

Micah: Yeah, if you split it up evenly, it’s the people that got caught up in COVID. Right, if you would have said 18,000 a year so 1500 a month would have been coming out. And then Congress comes in and says great news. You don’t have to take your RMD. Well, you’ve already taken some money out You’re limited in your rollovers in which you can put back in it’s not as simple as that.

Tammy: Kim whenever you send monthly payments to participants when they’re making those withdrawals. Did they get a statement every month somebody told me they get a statement.

Kim: They get a notification, not a statement but they get a notification that it was me, and we’re well aware that some participants don’t want that via the mail. They’d rather have it by e-mail. And we’re working on that, but at the moment, it is still a paper notification that the deposit was made.

Tammy: So you also offer quarterly payments and an annual payment so if they wanted to, for whatever reason, maybe there’s a bill that they pay once a year, can they do a once-a-year annual payment as well as monthly payments? Can they have two different distributions at the same time? 

Kim: You can so yes, kind of is the answer because you can’t have two withdrawals within a 30 day period. So let’s say you on January 1, you make your annual withdrawal of $25,000. And then you think I really want monthly payments as well. You’d have to wait 30 days come in and set the monthly payments up and go forward or vice versa. It doesn’t matter the order. What matters is the timeframe in between. And we did that not really to limit people in their ability to use their money. We did that to ensure processing times and streams don’t cross because then you know things can get mixed up. And we don’t want that

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Micah: Really detailed question on that. So forgive me if you don’t know the answer, but is it 30 days from when you submit the request or 30 days from when the distribution went out? So log on, Yeah, so if I log in on the first just making things up, I log in on the first and requested but the distribution doesn’t go up to the fifth. Again, just making updates. I’m just curious how precise that is.

Kim: I believe it is from when you request it but I will not put my hand on a stack of Bibles.

Micah: Okay. We’ll keep the Bible off to the side for now. Perfect. Well, I know what we’re talking about distribution options. One of things we’re talking about before which it’d be really great to to keep in mind is irreversible decisions. So one of the nice things under the TSP Modernization Act right is a lot more flexibility. We have a lot more withdrawal options which is fantastic. But there’s still a couple of irreversible decisions which again, this is great time to mean irreversible does not mean bad. But it does mean you cannot fix it. So there’s a giant red flag has hit a pause button and say hey, do we really know what this means? And are you making the right decision? So what are those irreversible things with the TSP?

Kim: There are really two Micah. One is if you purchase an annuity through the TSP, you purchase it with our vendors. So what we do is we take that money out of your account and you can use all or a portion of your account to purchase an annuity, but absent and error on our part, that decision is irrevocable, irreversible, done deal. And so that is something that is very important because on occasion there are people who believe an annuity and monthly payments are the same thing. And they most emphatically are not the same thing. So I completely agree with you that anytime you see the word, irrevocable, you should stop and if you need to, feel free to call the FERS line and you know a PSR will walk you through our participants support reps will help you and walk you through the options and what the various options mean. The other one that is is again, irreversible irrevocable is if you roll your entire balance out and you zero it out you can’t bring the money back. If you don’t have to have you can’t bring the money back. So if you are planning on rolling some or all of you if you’re planning on rolling the bulk of your money out, it’s wise to leave the minimum is 200 but you can fall behind below 200, because of the vagaries of the market, I always sort of recommend a slightly higher amount not not 1000s and 1000s. But just to make sure that you don’t fall below 200. And then we would automatically close that account. 

Tammy: Yeah, those are important to know. 

Micah: Yeah, I recommend that same thing if people are going to do a partial transfer out and I like 1000s, right? Because I like rounding up with that is like no, let’s make it a healthy balance in there. So maybe it doesn’t need to be six figures. But let’s not worry about it because you’re leaving that foot in the door. And whenever I’m talking to people about what do you mean I can’t put my money back in the TSP if I take it out, and I’m always saying well pause. I guess we could do is you could go back to work for the federal government and you could get another job and open up a TSP account but all of a sudden retirees don’t find that as a very appealing option anymore for some reason. So leaving that balance in the TSP is a great way to put that foot in the door.

Kim: Yes, it certainly is. And it’s just preserving your options, right people again, retirement and retirement choices can really be overwhelming. And so it is not hard to make a choice and then think this is not what I wanted to do. And if you have taken all your money out, well, you that’s, you know, unfortunate. But if you’ve left $500, $1,000 in the TSP, then you can roll your money back in.

Tammy: More even if you get a second career. And you have a 401 K plan if that TSP accounts open and you want to move that money into the Thrift, you would still have the option to do it.

Kim: Absolutely. And we now offer a rolling concierge service. So if you, if you want to roll money into the TSP, you can call the Thrift line and that to ask to be connected to the roll in Help Desk they will help you because as I’m sure you both know, the paperwork to move money between plans is not necessarily the easiest process in the world. And that’s simply you’re moving tax most of the time. It’s because you’re moving tax advantaged money. And so both the losing clan and the gaming plan have to make sure that all sorts of rules are followed. And so the concierge service helps with that process.

Tammy: That’s good to know. I didn’t even know that. 

Micah: No, I think it’s fantastic because I guess one of the things that if I look at some of the biggest mistakes I’ve seen with the TSP is people not understanding transfer, transfers versus rollovers. And this would be another way that that just easily comes in as people say, Oh, I’m just gonna put my money in the TSP and they just take a withdrawal from their 401 K plan. And then they’re planning it’s just to put that back in the TSP is like Oh, that is not work that way that comes with a lot of complications and potential taxes and issues that’s there. So these are things that that you could go from a great decision to an irreversible tax problem. Really, really quickly right here. There the fact that… Yeah, way too quickly. So the fact that you guys have this role in Help Desk, that is great, and this is the one that we got to maybe swallow or pride or get more information even though we think we know how it is. It’s worth picking up the phone and chatting with somebody else saying hey, let’s make sure if you if they disagree, okay, great. Maybe you talk to somebody else right? But make sure you know the right answer before you pull the trigger. Sorry, get on my soapbox on that.

Kim: Yes, no, it’s very true. All of these things when you’re dealing with tax advantaged money, regardless of where it’s sitting. There are IRS rules that attach and are relatively unforgiving in the overall scheme of things. And so you want to make sure you know what you’re doing before you get that money out of that account.

Tammy: Kim, whenever somebody leaves federal service, whether they’re resigning or retiring and not now they have access to the money in the thrift. Could you walk us through like some of the things one would do in order to make those selections like, do they fill out a form do they call the Thrift line? Do they go online or?

Kim: First of all, if you separate from government, you are more than welcome to leave your money with the TSP. There is no need to take your money out. You can let it grow and in fact, as you said earlier, you if you have other private sector 401 K’s or other plans that are meet the tax requirements, you can roll that money into the TSP and consolidate your retirement savings. But should you want to roll it out? Should you want to make a withdrawal you can go on you can log into your TSP my account and if you’re married, you can do the entire transaction online. You’ll fill out the form online and then your spouse will get in an e-mail to provide his or her consent. And then we will process the withdrawal. I would say it to our earlier point about irrevocable decisions. If you’re going through that form online, and you think hmm, I wonder what this means. Give us a call where we have operators standing by so you..

Micah: Don’t check it to find it out later. Pick up the phone and call first. Yes.

Kim: Or you hit the submit button. Please give us a call. And if for whatever reason, you don’t have access to a computer and you don’t want to do it online. You can call the Thrift line. They will mail you a TSP 99 or one of our withdrawal forms. It depends on your transaction, but it will be coded to you specifically. And that is an anti-fraud measure that we put in several years ago. It just makes sure that withdrawal forms are a easier to process once we get them back and be less prone to mischief. 

Tammy: Now what about when a participant passes away and a beneficiary let’s say it’s not even the spouse beneficiary it’s someone else. How do they contact the Thrift did they go online to report the death or is there a form they fill out? What do they do? 

Kim: Just give us a call. Do you notice that the in here give us a call and there is a form whose name I am now blanking on but basically what you do is you provide the TSP with the report of the participants death if you have access to it, a copy of the death certificate, but that gets the ball rolling and we would then look at that participants file see if there’s a beneficiary designation on file, you know and just start the process of processing the death benefit.

Tammy: And those beneficiaries they have the option of either taking the payment in cash and probably paying tax on it if it’s in the pre-tax account, or possibly transferring that into an inherited IRA from that account as well. 

Kim: Yes. 

Tammy: So again, it’s important to ask questions because if you take the payment, I would like you might know this as well. Can that still be transferred to an inherited IRA? No?

Micah: No, what’s distributions? Yeah, you can’t do rollover you can’t do rollovers on any inherited money that comes out including the spouses and this gets a little tricky. And so really, one of the things I love the TSP is there. I’m also going to encourage before you take a withdrawal, any death account, talk with a tax advisor because these have different chemistry brought up these have different types of tax consequences that can be there and the TSP for your own not overstating this the TSP is not set up to give tax advice on how this is going to set up for inheritances. Right. So you’ve got to get both of these. You got to know how the TSP works from distributions, which is fantastic. And then you got to get someone before you pull the trigger; that knows what it is. I’m just dealing with an estate right now and my clients getting money. And unfortunately, the executor just pulled all the money out of retirement accounts to send it to the benefit. Yeah, that face right there is the same one I made. And they’re like, Well, I talked to the estate attorney, and they said there’s no estate taxes. True, but there’s ordinary income taxes, and so now there’s a big tax bill that has to be paid. And I get to be the bearer of bad news. So maybe I’m just being selfish, sharing it with someone else to be the bearer of bad news, but you got to know how the distributions work and the tax consequences at the same time before you do it.

Kim: Eventually, with IRAs because inherited IRAs because the tax rules have changed, right? This stretch IRAs no longer exist. Now you have to take your money out in 10 years. There was some initial confusion over what that really meant. So again, we are not in any way, shape or form set up to give tax advice. That’s not our mission at all. But we do encourage people to understand the ramifications of what they’re doing.

Tammy: You know, sometimes I tell people when they file their beneficiary form to file that death benefits publication with it, because people don’t know what they’re I just talked to a guy who lost his son he was 50, see an older man he lost his 56-year-old son, who was a federal employee and he just took the distribution not knowing like what all he could do with it. So you know, it’s important for them sometimes you’ve never inherited money like that this can be a ton of money in some of these TSP and they certainly can. 

Kim: Yeah.

Micah: And also the other thing that we don’t think we give enough credence to on the death side of it is it’s emotional, right? You’re generally an executor or personal representative because you were close family. That’s generally who people pick is a close family member to do this than in this case, right? You lose your kid. That’s a massive emotional effect. Even if you know these things, you could still not be making good decisions because of that emotional effect. That’s there.

Kim: It is it is horrifically tough. I mean, that would be just everyone’s worst, worst nightmare. And, and again, you’re trying to make decisions. You may not fully comprehend or, or you’re just so you’re Yeah, you’re just trying to get through it. And so I completely concur that consulting and tax advisor or someone who has some experience in this area is definitely…

Tammy: Here’s not an urgency, right? You don’t have to hurry up and get it out of there. It’ll stay there; what happens?

Kim:  Well, once we transfer it to a beneficiary account, if it’s a spousal beneficiary account, there’s no urgency. But if, Micah is your beneficiary, Tammy and God forbid, something happens. We would and you’re not related. We would create temporary accounts for Micah’s benefit. He would have 90 days in which to make a choice about that money. And if he doesn’t roll it out into an inherited IRA or some other account, we will auto-force out a check. That does in fact, what happened.

Tammy:  With that was like kind of heard the backstory on that one. And that’s probably why the father was so upset because the money came out before he knew what to do with it.

Kim: Right. And that and that’s why at but again, we do; I mean, it’s not like we keep it a secret, and then we just send people big checks. We send notices that, but again, to Micha’s point, in that situation, when you’re dealing with the death of a loved one, reading, reading notices from the TSP or any other financial institution is probably not at the top of your list.

Tammy:  On top of your list through 

Micah: So on that, is it 90 days from the date of death or is it 90 days from when the account is created?

Kim: 90 days from when the account is created? 

Micah: Okay, so there’s a little bit more wiggle time, right. So this would be making sure before you submit forms before you do anything, what’s the overall plan that you want to do? Right, you address it. Okay. That’s a really good point. Kim, thank you for bringing that up. 

Kim: You’re welcome. 

Micah: So we talked about the TSP withdrawals getting off of the death theme, if I may. Let’s talk about real quick. So one of the things that always encouraged people about to say Hey, your TSP is not a bank account, right? But this isn’t going down to your bank and taking money out whatever you like. Number one, there’s investments, there’s tax consequences, but there’s also a timeline that’s here. So Kimwhat’s the general timeline from when somebody wants to take money out, and they go to process it online for when they actually receive the money?

Kim: So it depends on the course. It’s like if A then B, right. Sure, yeah. So if you have a current financial institution on file with us, and that’s where you want your money to go, then you could again go online, and you could do that transaction and again, spousal non spousal depends on what it is. We would get that let’s say this, that happens to the spouse. It all happens in a day, let’s say and that does that can happen. That night, we would then we would probably have gotten it in the afternoon, right? I’m making up a whole bunch I find that’s in the afternoon. So the next day wouldn’t be the day that we would then tell Blackrock at the end of the day you need or street street or fund managers. You need to sell X in order to fulfill this, right. So they do that trade overnight. That money comes back to a treasury slash TSP account, a big one in or not individuals, and then the Treasury at the same time that money comes back. We tell the Treasury where to send it so if it’s a cheque that will be mailed if it’s an EFT, it’ll be electric, electronically sent through the ACH process. So a lot of people forget about the fact that we’re not a bank. We don’t have money. So it’s we don’t have sort of a money market funds sitting around where we can just pull money from Micah and send it to him. We actually have to sell the shares that are being invested on that participant in behalf and that takes time. And so again, let’s let’s say it’s Friday afternoon, and we get it Friday afternoon. Well, that sale then isn’t going to happen until Tuesday. Because we don’t send that transaction right we don’t notify. So that’s the process and people do get upset thinking that we’re somehow holding on to their money. But it’s just again, we don’t have the money. It’s it’s invested on your behalf. I don’t want to scare anybody. We have the money but we don’t.

Tammy: I love sitting there in your office.

Kim: So that was that was based on the premise you already have financial information on file with us.

Tammy: Anything you said about making sure you have that banking information you can set that up without making a withdrawal. Right, right. Just absolutely.

Kim: And and to the extent that, like you’re starting to, let’s say you even have a hint of a thought I might need a loan or I might need a withdrawal. Go into your TSP my account or call us and have us put the financial information on file because it has to be on file for a full seven days before we will process a withdrawal, and that is done as an anti-fraud measure in more large part that gives us time to contact the participant and say hey, this count was put on your you know, on your TSP account was that you can you know, in some ways you but every once in a while there’s a bad actor in the world and that’s why we do it. It’s not again; it’s not that we have an attachment to your money. It’s that we are trying to protect it.

Tammy: Now you can choose to take money from the traditional side and leave your Roth money alone, right under correct? We’re allowed to pick and choose or take pro rata if that’s your choice. Yes. Well, we can’t pick and choose like if we’re invested 50% G and 50% C, and we’re taking out $1,000. We can’t tell you to take it just out of our Gfoundry.

Kim: No, you can’t. You can, of course, rebalance immediately afterwards, but you can tell us which one to fall.

Tammy: With just just to then go in there and fix your account. Right.

Micah: So Kim, I just wanna go back to a timeline if I may. So if I wrote this down, right, so we have the honestly three date plus two days, right? So for the Friday, there was a Tuesday that the money is going to be available. So if you’re having financial tuitions and then plus, then after that you’d have to do let’s assume it’s electronic transfer, then maybe it’s two to three days for the electronic transfer to go through. Right. Well, they can.

Kim: What, what I found once I started this job, you know, you’ll learn all sorts of fun stuff. What I didn’t know was that banks, depending on their size, and the number of what they get from the treasury, sometimes they only pull it and credit it once a day. Other times it’s a major institution, and they’re crediting it all the time. So I have seen it happen where it’s you get it, you put in your request trade, and you’ve got it in two days. Right. That’s sort of if everything if you did it in the morning, and you had it online, and that technology was there regularly and credits the account, it can happen in two days. I think three to four days is far more likely scenario. And again, it it has been longer, but it’s because the bank hasn’t credited the account, which I didn’t know that happened. 

Micah: Yeah, it’s all again, a manpower size, right? They’re all different on how they do that. So I wouldn’t be planning at least a week if you need money in advance and if you don’t have a financial institution setup, then really you’re talking two weeks, maybe two and a half weeks that if you’re ahead of it, right and you’re getting the money in advance, then it’s no problem. The only problem comes up there people are frustrated is when they thought they could get their money sooner. So you got to be thinking, and I’m not picking on the TSP. I’m gonna say any investment institution the same working blocks; you talked about work across the board, it’s slightly different levers but it’s the same thing if your money is invested, it has to be sold has to be freed up, has to be transferred, right? All of those things happen. And so any type of investment account, you should be thinking a week plus in advance before you want money out. get that process started.

Kim: Absolutely. And again, if if you are thinking, as I said if you’re just have a glimmer that whether it’s it’s because you have a hardship and you need money, or you need a loan because you’re hot water heater just blew up any of those things. You know, if you think that that’s something, go in and put your financial institution information online, because… So what happens if you don’t? Well, you have an option of having us mail a check to you. Right, and so the timeline we just described becomes longer because you still have the front portion, and then the Treasury mails the checkout. And that is subject to the vagaries of the Postal Service.

Micah: I live in Alaska. So I tell people takes two weeks to get a check from the Treasury Department. So that’s about 10 days, 10 to 14 days is about what we see for our clients, on distributions. I know we’re going a little bit long, but I had a quick question on international transfers. So, some clients that TSP adjustments they have great career they want to move overseas and just because you move overseas doesn’t mean you have to get rid of your TSP. However, there’s a little limit. There’s some rules around how you can take money out, right?

Kim: Right. The Postal Service because again, Treasury is acting as our bank, they’re sending out the checks. They will only send that money to a US financial institution. And so if you’re moving overseas, you should set up you should maintain a US bank and then you can work to find a bank wherever you are, that can link those two accounts. But we are not able to send the money overseas wherever that is, at least not electronically. Again, if you want to request a check. We can mail a check but then you’re talking international mail and there’s even more vagaries because it’s multiple postal services.

Tammy: Think of those little details when we’re making this wonderful dream of moving to the TV. 

Kim: Exactly right. 

Micah: A lot of little housekeeping things you got to think about when you’re gonna live abroad and live internationally. I have a couple clients doing it right now. So it’s kind of top of mind but it’s one of these things that thinking about in advance and starting to walk through that process is always so more advantageous. Just like if you want a distribution, come to your point A if you got that ankling, put your financial institution in there. What if you don’t need the distribution? Well, then you don’t pull the money out but it’s just fine. It doesn’t cost anything. There’s no downside to doing. One of these things is really, really important. 

Micah: This podcast is all about action items for our listeners. We love to chit chat and to go through things that we’d love to kind of talk about that what are things that our listeners could be doing this week in order to improve their understanding the TSP to improve their understanding on retirement, so I’ll put you on the spot. I’ll go ahead and kick it off and I’ll say number one thing that you should do is figure out exactly what your withdrawal option what you think it is, and then contact the TSP and find out how it really works. So if you think you want to do an annuity, if you think you want to do monthly payments, you think you want to do a lump sum, whatever you think that is write that down, then call up the TSP office and find out how they say these distribution options work because it’s before you need it.

Tammy: I would say to make sure your beneficiary designation is up to date before a federal service, make sure your address is current with the TSP because whenever there’s mailings, you don’t want to have to have that mail forwarded, you know, within a couple of weeks you want to want it sent. So things like that, and if you are separated, get that bank account on record. So when you do need the money that’s not going to delay your withdrawal, those would be my suggestions.

Kim: That would be excellent suggestions. And I would say you can go to tsp.gov and search for online learning. And we have a bunch of webinars that are available. You can watch they’re also recorded. So you know you can get some popcorn, sit back in the afternoon, and you can watch some of the TSP webinars. But I think it’s an excellent way our trainers are wonderful. They know more about the TSP than anybody, and so they can really help explain, or even if you know like 98% of it, there might be that little enough effect. And so I would highly recommend those as well. 

Tammy: I endorsed them as well. I’ve listened to a few of them, and they’ve been very, very well done.

Micah: Fantastic. That is great information. Well, as always, Tammy, It’s great to have you on the podcast. Thank you so much, Kim; thank you for taking the time out of your day and joining us and helping educate more of our listeners. I know they appreciate it, and so do we. And until next time, happy planning.

 

 

 

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