In this episode, Val explains what a TSP Rollover is, and how it can be used to assume more control of your assets. Consider implementing a Fixed Indexed Annuity into your retirement plan to provide you and your loved ones with an income for life.
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Consider a TSP Rollover to Protect and Grow Your Wealth.mp3: Audio automatically transcribed by Sonix
Consider a TSP Rollover to Protect and Grow Your Wealth.mp3: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.
Producer:
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Val Majewski:
Well, welcome back to the Federal Retirement Show. I'm your host, Val Majewski, vice president here at American Benefits Exchange. And really thank you for joining us. I appreciate you watching, subscribing, sharing our episodes, our information. It's a great benefit and it's a great privilege for us to be able to share this information with you, the federal employee, and hopefully it helps you with the choices you make along the course of your working career, the outcomes, preparing for retirement, making the best decisions, etc., etc., etc.. So today it's a very important topic and questions that we get asked all the time revolve around TSP. I mean, it's been a hot topic lately, especially with the way the market's going, people nearing and entering retirement and wondering what to do with their TSP. And we just try to allow you, the federal employee, to make the best decision possible for you, your family, your situation, by sharing with you all of the options that you have available and sharing with you most the most common things that we see our employees do and why they do it, because maybe you're in the same boat. Maybe your situation calls for the same type of solution. So if you had watched previously, we had talked about TSP, rollovers and specifically utilizing a TSP rollover to create another guaranteed lifetime income stream so you can supplement your pension, Social Security or the first supplement with your TSP. Now, if you recall from previous episodes that we're not a huge fans of the life annuity within TSP, today we're going to be talking about the opposite side of the spectrum.
Val Majewski:
What if you don't need your TSP money for income? What if you just want to have your TSP money be protected and let it sit and grow as you are near or enter into retirement? Because those are one of the two scenarios that we typically see federal employees falling into. Either they need their TSP for lifetime income to be another pension check, just like pension and Social Security. Or they don't need the money, but they want to make sure that it's kept safe and still has the opportunity for growth. So we're going to talk about that today. Tsp, Rollovers for Protection and Growth. Now just to review, if you've not seen our previous episode, what a TSP rollover is, let's go over what a TSP rollover is. It is the opportunity for you, the federal employee, to separate your funds from the control and management of TSP. You roll the money out, you transfer it out, and typically you're transferring it out into your own qualified account in order to avoid any tax liability on that move. Now, if you've got a traditional bucket of TSP, you're going to put that into a traditional IRA. If you have a Roth bucket in your TSP, it's going to go into a Roth IRA, it's going to keep the same classification. And as a result of that move, there's no taxes, no penalties, no fees, no transfer fees or costs in order to do that move.
Val Majewski:
Now, who is this available? For? Well, if you're an active federal employee, you have to be at least 59 and a half or older in order to do what's known as an age based in-service withdrawal and in-service transfer. It's called we talked about a rollover, but it's technically a transfer. If you're 59 and a half or older actively working for the federal government, you can move a portion or all of your TSP funds into your own qualified account depending upon the function or purpose of that account. Now, once you're separated from service, it doesn't matter what age you are. You can do a transfer of a portion or all of your TSP funds again into a similar type account for whatever function you want it to serve. It allows you once again to take ownership of your funds. You now are in control and you put it into a fund or a plan that is serving a purpose. Right. It's either going to be for that income, it's going to be for growth. It can be a combination of multiple things. But now you take ownership and control the money. We talked about being able to do income for life without cashing in your balance. That's exactly what the TSP MetLife annuity does. So if you are interested, if you're watching this saying, you know what, I'm thinking of lifetime income with my TSP, we'll go back and watch our previous episode about TSP rollovers for guaranteed lifetime income.
Val Majewski:
A lot of great information in there so that you can see about how you can turn your TSP balance into a lifetime income stream without cashing it in and falling trap through the MetLife annuity. I said, Why are we doing these? Well, we just talked about income, but what if you don't need lifetime income? What if you're looking for. Guaranteed protection with growth potential guaranteed protection with growth potential. Now, you may be thinking, well, there are ways I can do this within TSB. I can certainly as a federal employee, I can move a portion or all of my money within TSP into the G Fund. That is the only fund within TSP that is guaranteed never to lose. It's guaranteed protected against the volatility and the risks of the stock market. You're right, you and you would be correct. That is the only fund within TSP that is guaranteed not to lose when it comes to market volatility, things like that. It's not saying that it can never go down to zero, but it's just saying that it will never be below zero. Now, if you're tracking, as we do, the performance of the G Fund over the past five or ten years, you can see that it is trending just below 2% on average per year. Over the past ten years, it's about 1.94%, depending upon the timing of when you're watching this video at the time of this video. The average annual return of the G Fund over the past ten years is 1.94%.
Val Majewski:
We're at a time where inflation is extremely high, so it is not even keeping up with inflation right now, the G Fund, but the protection side, it will protect you 100% against market volatility and losses. Now, what if you said, you know what, I'm looking to get that same protection, but you're mentioning I could do this with a rollover. Well, how does this work? We'd be looking at the same type of deal. So if you're thinking, I'm nearing retirement, I'm I've accumulated a good amount of money over the course of my career. I've been in the accumulation phase. I'm nearing retirement. I'm at 59 and a half or older. I'm separated from service, most likely now you are out of the accumulation phase and you're going more into the conservation or preservation phase. Now, what does that mean? That means you're happy with the amount of money you've accumulated over time, and you're no longer wanting to take a risk with that money and lose things that the last minute you want to conserve or preserve the money you have or the bulk of your money in TSP by taking it out of risk, taking it out of those funds that are subject to the big ups and downs of the market, like the stock funds or the L funds, there's different funds within TSP that come with different risks. But if you're saying I want to eliminate some of those risks, well, if you want to completely eliminate 100% I just said the only option there is with the G Fund.
Val Majewski:
A G fund is only guaranteed option. Now, I said 1.94 over the past ten years. 1.45 on average over the past three. Look not the greatest of returns. I'm certainly not recommending you put it into a checking or savings account and keep it protected that way because you're going to get even less interest. So federal employees then ask a certain question. Yeah, how how can I keep my money protected? I don't know of any other way other than the G Fund to keep my money 100% protected safe for market risk. There's no chance that I can ever lose any money due to market conditions. How can I get the same protections of the G fund but earn better interest in the G Fund? Is that a possibility? Well, what if there was a solution? What if there is a way that you can do that? What if there is a way that you can take your money out of the control of TSP? You can get the same protections of the G Fund, the same guaranteed protection that you can never lose any money due to market conditions. However, you have the ability, the potential to earn much better interest than the G Fund, in some cases 3 to 4 times as much on an annual basis as the G Fund. Is that something you'd be interested in if that scenario was available? You get the same protection of the G, but much better interest potential than the G.
Val Majewski:
Is that something you'd be interested? Chances are your answer would be yes. I don't see a reason why you wouldn't be interested in learning about a solution that would provide that type of scenario. Right. And these types of plans that I'm talking about, you may be thinking, okay, well, what type of plan out there can guarantee that I'm not going to lose money due to market conditions, but still give me the potential for solid interest growth, which is better maybe 3 to 4 times as much as the G Fund. The plan is called a fixed index annuity. Right. Fixed. Fixed means I can't lose any money. It's fixed. The worst I can do in a given year is 0%. And I'm not directly invested in the stock market. Index means my interest within the plan is based upon the performance of the market without being directly invested in it. This is giving you the best of both worlds, right? You're going to get some market participation without being directly invested in the market. And then an annuity. The annuity protects money, keeps it safe. It's a tax deferred vehicle. And as we mentioned, there are plans that allow for lifetime income without cashing in your balance. But you want protection. The worst you can ever do in a given year is 0%. You can only go up, you can never go back down. So you can experience and I say in quotes, market like returns, it's not exactly the same without directly investing in the stock market.
Val Majewski:
This is an option for those that want to keep their money safe and sound, safe and sound, meaning out of the risk to the market, whatever. If it's a portion or all of your TSP, it's a way to keep your money safe and sound while still having that opportunity for better growth. Right. We don't want to just bury the money in the backyard or hide it under your mattress. You want to make sure that your money is working for you. So if your TSP, you've said I've done a great job of accumulating money over time. I'm in that point in my career where I want to conserve my money. I want to preserve my money, but I don't want to just stick it on the G fund and earn nothing. I certainly don't want to take it out and put it in my checking your savings account and pay taxes. I don't want to, as I just mentioned, bury the backyard or hide it under the mattress and earn zero. What's out there that would give me protection, peace of mind, safety, security with still the potential for solid interest. That's the type of plan that we're talking about. That's a way that you can utilize what we call a TSP rollover or TSP transfer, protect your money, keep it safe, get it out of the control of TSP. You are in control and still have the ability to earn solid interest.
Val Majewski:
If that's something that's of interest to you, if that's a scenario that sounds like yours, reach out to us. Let us know how we can help. We can at least review all the options. You can gather some information and see if doing something like this is right for you. Ultimately, the decision is up to you. These are just things that we've seen other federal employees do in these scenarios. And these are just two basic scenarios, right? Looking for either income or growth today. We're talking about growth, potential protection and growth. Again, if that's you reach out to us, we'd be happy to go over your situation with you, explore all the options so you can make the best decision for you, your family, your situation, your future retirement and your nest egg, the money that you've saved up in your TSP over time. So if you like this video, please go back and watch our previous episodes. You can visit us at Federal Retirement Showcase. You've seen it on the bottom of the video during the course of this recording. Like Subscribe, share with all of your friends, your colleagues on wherever you listen to podcasts, Spotify, Apple, etc. Really enjoy sharing this information with you and helping you, the federal employee. So again, you can make the best decisions for you during your working career and as you move on to retirement. Again, my name is Val Majewski, host of Federal Retirement Show. Thank you for joining me. And we'll see you again on a future episode. And.
Producer:
Any examples used are for illustrative purposes only, and do not take into account your particular investment objectives, financial situation or needs, and may not be suitable for all investors. It is not intended to predict the performance of any specific investment and is not a solicitation or recommendation of any investment strategy. Fixed annuities, including multi year guaranteed rate annuities, are not designed for short term investments and may be subject to restrictions, fees and surrender charges as described in the annuity contract. Guarantees are backed by the financial strength and claims paying ability of the issuer.
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