What Should I Do With My TSP at Retirement?

hello hello hello welcome back to this episode and I hope today this information that I will share with you will help you plan your federal benefits just a little better just like the name of this podcast suggests or the name of my youtube channel wherever you are at thank you for being here and today's topic is a good one it's a good one and we are talking about how or what I guess to do with your TSP what to do with your TSP in retirement maybe feds because they've been a Fed for let's say two decades 20 years or 30 years or whatever they're pretty familiar with what to do with it in their career that okay I got this I've kind of figured out how I like to invest I got this I'm seeing good returns we're good but in retirement people like hey what do I do now and there are two main questions that people have when it comes to what to do with the TSP in retirement the first is to IRA or not to IRA that is the question right to rollover your TSP to an IRA or to keep it in the TSP is basically one of the biggest questions that I hear all the time and there's pros and cons there's no specific fixed answer that's perfect for everyone there's pros and cons of each first the TSP is extremely simple and you are probably pretty familiar with it up to this point where you've used it a long time you understand the funds the fees are ridiculously low and you cannot find fees like that on the private world you could find some funds that are low fee but it's not near as low as what you'll find in the TSP so that is a huge advantage of the TSP it's simple you're familiar with it the fees are extremely low now if you want to invest in other things and new things and you're comfortable with that and IRA is obviously the better option IRA is also have a little more flexibility when taking money out you can take things out in different ways and things like that but the TSP now with the Modernization Act last year it is a lot easier things out so that's not such a huge advantage for IRAs anymore but it's still something it is you could basically take money out however you want from an IRA now there's some tax implications of course but you can do it it is allowed so that is kind of how I frame this decisions like okay what makes sense for you what do you care about what aspects of both accounts do you actually care about because everyone's different not everyone wants the same things so often the reason this question comes up is because they say hey my financial advisor says to roll my TSP into an IRA and that may be the best decision for you I don't know but keep in mind most financial advisors get paid to manage money they get paid depending on how much money they have of yours and they're investing for you so the more they have the more money they make right so of course many financial advisors are gonna advise you to roll it out now it's not always a bad decision right often times that there's a ton of value that they bring by just rolling out they can handle it you don't have to worry about it one bit right that's a huge advantage but know that that is kind of what you're thinking about what they're thinking about when making that decision it's like I said still might make sense I'm not saying it doesn't I'm a financial adviser I help people manage money but I understand that it doesn't always makes a sense to pull money out of the TSP the TSP is a great account and oftentimes you can pull some out of the TSP and keep some of the TSP so you can enjoy both elements of having the flexibility of an IRA as well as the really really nice benefits of a TSP so there's the balance there right I just want to keep you informed kind of why a financial advisor would tell you to do that right I'm not saying all financial advisors are bad I have definitely seen incredible advisors that do incredible work for clients but I've also seen bad I'm in the industry I'm a financial planner I see both sides so you just have to be wary of who you're talking to maybe why there tell to do something and don't be afraid to ask the question say hey thank you for that advice why does this make sense for me why should I take it out roll it to an IRA other than you getting paid more right if there's legitimate reasons awesome do it I don't want to say don't do it I'm just saying no the reasons and no the long-term ramifications of everything you do okay so that is the first question of should you roll it to an IRA or not that's the first question I get all the time the second question and probably more importantly is how should you invest your TSP or invest an IRA or whatever you have your money in how should you invest in retirement because the retirement needs of your retirement savings are very different than your needs in your career because most of time most people are living off a portion of their TSP their retirement savings wherever it is at in retirement so you need to be investing differently to really make sure you have all those needs covered okay so I really think about this in three different buckets this is a good way to approach it and now I'm not gonna give you any specific allocations - hey invest exactly like this this fun innocent fun because that kind of thing doesn't exist the only way I know how to invest my clients funds is when I get intimately familiar with what they're trying to do what income sources they have whether their goals and what they're trying to do with their life and their money and their family and everything that I'm not okay for you this makes sense so you have to do that for you if you're not working with an advisor or anyone else you have to take responsibility and do that kind of analysis for you what makes sense for you then take it from there but I'll give you these three buckets I like to call them that I used to frame how to invest in retirement okay because the retirement means like I said are different than you have in your career so bucket number one is the cash bucket bucket basically it is the bucket that is gonna cover the next three to five years of your expenses okay where if let's say the market tanks bad tomorrow because you had this bucket where it's a cash bucket it's not gonna go up and down with the market are you gonna make money with it no not really but if the market comes down you have this bucket available to cover your expenses in retirement so that you can wait out three to five years and that it is generally plenty of time to let the market recover your other investments will get better and grow and you will be able to survive that without selling when it is low because that is terrible to have to sell your your investments razo so that is the reason why you want to have a cash bucket that is gonna provide three to five years of expenses and I'm not saying let's say let's say use fifty grand a year to live maybe forty grandma that is already covered with your pension and your social security so to cover the difference units need ten grand a year from your TSP so keep that in to keep that in mind or it's different for everyone their cash needs some people like hey I'm actually going to pay off my house I need a little more whatever it is look at your situation what do you need so if something happens you can wait out three to five years and the market can't come back okay that's bucket number one the cash bucket second bucket is the is the growth bucket now this bucket is kind of what I referenced to before is that we're gonna invest the things that grow more right but consequently because they grow a little faster that it's not cash right it's not gonna stay there it this is the bucket that's gonna really provide you what you need to beat inflation over time because if you just let money sit it will sit there and inflation will come and eat at it every single year and with current inflation rates anywhere it depends where it's at but anywhere between twenty thirty years your mind is gonna be cut in half just by sitting there right it's gonna be worth less and less every year that you let us sit you have to get some growth in retirement to make your money last and to beat inflation so it's super super important so this bucket the income bright bucket is gonna bounce around a little more but that is okay because we have a cash bucket and these together provide the flexibility and the growth that you will need in retirement now the third bucket it's the income bucket it's kind of a mixture of the two other ones we're basically these are in more like bonds things like the f-fun things that are a little more conservative than the growth bucket but it's gonna provide some income for us so that we could slowly replenish the cash bucket and we'll provide some growth just not as aggressively and it won't go as low in the market tanks as well so a nice medium to write some cash and a little bit of growth that you will need in retirement so those are the three buckets and kind of the way I think about it in retirement in those three buckets and of course the exact proportions and what makes sense for you is gonna be completely different even with amongst my clients is very different depending on their needs what they have all their income sources all these things that it changes a lot but looking at your situation framing it in this mindset I guess in these three buckets approach will help you say okay I think I need this much in this much and this much and it might even help you know if you're ready to retire looking do this doing this analysis saying hey if I follow downs advice and I look at all my income sources and my TSP buh-buh-bah can I do his buckets approach that approach and I'm not gonna be stressed right to make a certain amount of return to make sure I have what I mean whatever do what makes sense for you but I hope this gives some context some knowledge and information about kind of how I approach investing and what you should do with your TSP in retirement I hope this is helpful please check out all my content I have a full course on your TSP is completely free I have a link in the description about my courses click that we'll go through everything I have and we'll help you really nail down some of these concepts that I talked about today but I hope this is helpful again and I'll see you next week and again thank you for making to the end of my video the end of my podcast I hope this brought value to you and your life my goal with this content is to bring as much value to as many people as I possibly can so please if you can if this brought value to you please show your support subscribe hit the thumbs up comment give me feedback about what you want to hear about what you want to learn about and how you can get more value out of this and so that I could do the very best I can to make this the best channel for my viewers for my listeners the very best I can so again thank you for being here and investing in yourself and in your future and I will see you next week

Channel: Haws Federal Advisors

Views: 47,206

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Id: kFLRgctTRHU

Length: 11min 37sec (697 seconds)

Published: Tue Sep 08 2020