TSP and Post-Retirement Spending: It’s OK to Draw it Down

TSP and Post-Retirement Spending: It’s OK to Draw it Down

If you’ve been faithfully building up your Thrift Savings Plan (TSP)during your working years, it’s time to think about what that money is reallyfor—spending it.

Yes, that’s right. The whole point of contributing to your TSP is so you can use it in retirement. But for many federal employees, the idea of seeing that balance go down creates anxiety. Let me reassure you: unless you plan to leave your entire TSP to your heirs, your balance should go down.That’s the plan. If you leave to anyone besides your spouse, the Secure Act 2.0rule will take effect. This ruling is simple: The person(s) who inherited the money will have to spend all the money in 10 years. If not, the government will take 25% of the balance. They will do that each year. When I say spend it, they must pull the money out of the account and pay the taxes. Now, if you plan to leave to your heirs, click here to speak to Danny Favreau; he can help you and make that money that you're leaving tax-free for your family.

Don’t Just Accumulate—Strategize

While working, your goal was simple: save, grow, repeat. But inretirement, the strategy flips. Now it’s about drawing income to support your lifestyle and ensure your money lasts.

Things to know:

1. Required Minimum Distributions atthe age of 73

This is a conservative, simple option. Some roll their TSP into an IRAand follow a similar method there. Either way, it helps your money last—andkeeps your Required Minimum Distributions (RMDs) compliant.

2. Purchase a Life Annuity

They serve a purpose: guaranteed income for life. Some federal retirees exploreannuities outside the TSP with more flexibility or benefits.

3. Follow the 4% Rule

This rule suggests you start by withdrawing 4% of your TSP balanceannually, adjusting each year for inflation. It’s simple and effective—andstudies show it offers a high probability of your money lasting 30+ years. Ofcourse, it’s not a guarantee, and you’ll need to monitor market returns andspending patterns.

Can You Spend More Early inRetirement?

Yes—if you plan accordingly.

Some retirees spend more in the early, active retirement years (thinktravel, home upgrades, bucket list items) and taper off later. That works—aslong as it’s part of a plan. Most of us naturally slow down later in life andspend less. Case in point: My Aunt Dorothy took a trip around the world earlyin retirement. Later, her “travels” were limited to coffee shops and churchgroups in Champaign, IL. Her spending dropped, but her quality of life didn’t.

Bottom Line

If you’re still working, it’s never too early to think about how you’ll spendyour TSP—not just how you’ll grow it. Your savings give you freedom,confidence, and income throughout retirement.

Ready to talk about a custom TSP income strategy? Let’s sit down and map it out—so youdon’t just retire with money, you retire with a plan.

Schedule Your Free TSP Review – By clicking here.
Let’s build a drawdown strategy you can count on.

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