Should I withdraw funds from my Thrift Savings Plan at one time or over several years?

I am almost 70.5 years old and I need to close out my Thrift Savings Plan. Should I withdraw my funds throughout the next three years in equal parts or withdraw it all at one time when I turn 70.5 years old?

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2 days ago

You have a few options when it comes to withdrawing from your TSP account.  The two biggest factors you want to think about are taxes and the need for income.  I would hesitate to recommend a full single payment withdrawal because you would likely be faced with a large income tax bill.  Your other full withdrawal options are monthly payments (which can be a dollar amount you specify up-front or an amount based on your life expectancy).  This will provide you regular income and spread out the taxes over multiple years (depending on your balance amount).  You can also use your balance to purchase an annuity, which again, can spread out the taxes and provide income.  The downside to these three options is if you are not only looking for income, but growth of the account as well, then these three options may not work for you.  In this instance, you may benefit more from rolling the TSP account over to a traditional IRA, where it can be invested in a more growth oriented investment.  If you do a direct rollover from the TSP to the IRA, rather than to yourself, you can avoid paying income taxes on the full amount at the time of the rollover.  You would be required to begin mandatory distributions at 70 1/2, but the balance left in the IRA would still have the opportunity to grow.  Which option is best for you really depends on you current situation and your goals for the account.  I would recommend reaching out to a fee-only planner who can take a closer look at your situation and help you make the decision. 

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