1. Investment Flexibility: IRAs typically offer a wider range of investment options compared to TSPs, allowing you to tailor your portfolio to your specific goals and risk tolerance.
2. More control: With an IRA, you have greater control over your investments and can choose your own investment strategies including stocks, bonds, and mutual funds.
3. Consolidation: Rolling over TSP funds into an IRA can simplify your retirement accounts by consolidating them into one, making it easier to manage and track your investments.
4. Beneficiary options: IRAs often provide more flexible beneficiary options, allowing you to customize the distribution of your assets to your beneficiaries.
5. No Required Minimum Distributions at 72: Unlike TSPs, some IRAs, like ROTH IRAs, do not have required RMDs at age 72, which can be a wonderful advantage for those who want to continue tax advantage growth.

Rolling your Thrift Savings Plan assets into a Traditional IRA will help you avoid the 10% early withdrawal penalty. You will also control your IRA and have unlimited investment options. If you enjoy hands on investments, then rolling your TSP into an IRA may be for you. Contact us today for a tailored investment strategy on how your TSP can work as hard as you worked for it.

Example below:

John Doe has left the service and now working as an engineer at Lockheed Martin in Fort Worth, Texas. John has a TSP that he is no longer actively contributing to and an active 401k through Lockheed Martin.

He is faced with 3 options:

1. He could leave his TSP where it is and make sure it is invested, growing for his retirement.
2. He could decide to transfer to his current 401k, similarly reinvesting for his retirement.
3. Lastly, he could direct it to a self-directed IRA and invest on his own for retirement.

Option 1:

The TSP has limited investment options so, leaving his TSP does not allow him access to the investment options that have historically had higher returns .. There are only 5 main funds to choose from and a few target funds. In 2022, the TSP underwent a series of changes impacting its many account holders. These included the opening of a “Mutual Fund Window” to supplement the limited offering of investment funds previously available to plan participants- though the associated expenses make it prohibitively expensive for many participants. He will also not be able to make new contributions. Having one more account to keep track of can also be a headache for some people. Not only does it involve more work when balancing your assets, but you also must maintain more paperwork.

Option 2:

Again, John is limited to his new plan’s investment options. This is important if his new 401(k) plan has limited investment options or higher than average expense ratios, which cause lower returns. Some employers have a minimum waiting period before you can sign up for their 401(k) plan, so you may have to wait before you can rollover your TSP assets.

Option 3:

The biggest advantages of rolling over his TSP into an IRA is maintaining certain tax advantages, and controlling his investment options which are no longer limited to the investment options in the Thrift Savings Plan or his new employer’s 401(k) plan. Total control allows him to limit his expenses and maintain full control of his investment.

John Doe decides on option 3, simply because, when you can self-direct, you self-direct. John will now have control over his investments, he will have access to more investment options since his new employer’s 401(k) plan does not offer ideal investment options.

The process to get started is simple, and we are here to guide you through it. Contact us today for a tailored investment strategy on how your TSP can work as hard for you, as you worked for it.

About Matt

Matt Ward is a financial advisor and the president of New Century Investments, an independent investment advisory firm serving business owners, pre-retirees, and retirees in the Dallas-Fort Worth area and beyond. Matt is passionate about integrating investing, planning, and tax management into a holistic approach. Matt’s breadth of knowledge and experience in both taxes and investment management sets him apart, giving him the ability to design, advise on, and manage business strategies, tax efficiency, and retirement planning. He is known for his care and attention to detail and works hard to develop personal relationships with each of his clients so they can benefit from his customized service and guidance. He loves walking with his clients through their financial journey, supporting them and celebrating with them as they reach their goals. 

Matt’s Corner

The post “I’ve retired from the Military, now working for Lockheed Martin, what should I do with my old TSP?” appeared first on New Century Investments.

1. Leave It With Your Former Employer: You can choose to leave your retirement account with your old employer. This option works if you’re satisfied with the investment options provided and there are no excessive fees. However, it can become challenging to keep track of multiple accounts with different employers.
2. Roll it Over Into a New Employer’s Plan: If your new employer offers a retirement plan and accepts rollovers, you can choose to roll your old account into the new one. This could simplify your finances by consolidating your savings.
3. Roll it Over into an Individual Retirement Account (IRA): This is a common choice and for good reason. IRAs often offer a greater variety of investment options compared to employer-sponsored plans. Moreover, IRAs can be set up with any financial institution, giving you complete control over your retirement savings.
4. Cash it Out: This should generally be your last resort. Withdrawing your retirement savings early can lead to penalties and a hefty tax bill. Also, you will miss out on the compound interest that could have grown your savings significantly over time.

Remember, it’s crucial to consult with a financial advisor before making any decisions. This ensures that you’re making the best choice for your specific financial situation and retirement goals. Additionally, it’s important to keep track of your retirement accounts and regularly review your investments to ensure they align with your risk tolerance and goals.

If you do decide to roll over or consolidate your old retirement accounts, be sure to carefully review the fees and investment options of the new plan or IRA. You don’t want to end up in a worse financial situation due to high fees or poor investment choices.

In summary, it’s essential to consider all your options when dealing with old retirement accounts. Leaving them behind may seem like the easiest option, but it could result in a scattered and less optimized retirement plan. Taking the time to evaluate and make an informed decision can greatly benefit your future financial stability and peace of mind. Don’t let your old retirement accounts become a forgotten part of your financial portfolio. Take control and make the most out of your retirement savings for a secure future. So, whether you choose to leave it with your former employer, roll it over into a new plan or IRA, or cash it out as a last resort, be sure to carefully weigh your options and seek professional advice when needed. Your retirement is a crucial time in your life, and it’s essential to make the best choices for a comfortable and secure future. So, keep these tips in mind when dealing with your old retirement accounts and take charge of your financial future. Happy retirement planning!

About Matt

Matt Ward is a financial advisor and the president of New Century Investments, an independent investment advisory firm serving business owners, pre-retirees, and retirees in the Dallas-Fort Worth area and beyond. Matt is passionate about integrating investing, planning, and tax management into a holistic approach. Matt’s breadth of knowledge and experience in both taxes and investment management sets him apart, giving him the ability to design, advise on, and manage business strategies, tax efficiency, and retirement planning. He is known for his care and attention to detail and works hard to develop personal relationships with each of his clients so they can benefit from his customized service and guidance. He loves walking with his clients through their financial journey, supporting them and celebrating with them as they reach their goals. 

Matt’s Corner

The post What to do with your Old Retirement Accounts appeared first on New Century Investments.

1. Investment Flexibility: IRAs typically offer a wider range of investment options compared to TSPs, allowing you to tailor your portfolio to your specific goals and risk tolerance.
2. More control: With an IRA, you have greater control over your investments and can choose your own investment strategies including stocks, bonds, and mutual funds.
3. Consolidation: Rolling over TSP funds into an IRA can simplify your retirement accounts by consolidating them into one, making it easier to manage and track your investments.
4. Beneficiary options: IRAs often provide more flexible beneficiary options, allowing you to customize the distribution of your assets to your beneficiaries.
5. No Required Minimum Distributions at 72: Unlike TSPs, some IRAs, like ROTH IRAs, do not have required RMDs at age 72, which can be a wonderful advantage for those who want to continue tax advantage growth.

Rolling your Thrift Savings Plan assets into a Traditional IRA will help you avoid the 10% early withdrawal penalty. You will also control your IRA and have unlimited investment options. If you enjoy hands on investments, then rolling your TSP into an IRA may be for you.

Example below:

John Doe has left the service and now working as an engineer at Lockheed Martin in Fort Worth, Texas. John has a TSP that he is no longer actively contributing to and an active 401k through Lockheed Martin.

He is faced with 3 options:

1. He could leave his TSP where it is and make sure it is invested, growing for his retirement.
2. He could decide to transfer to his current 401k, similarly reinvesting for his retirement.
3. Lastly, he could direct it to a self-directed IRA and invest on his own for retirement.

Option 1:

The TSP has limited investment options so, leaving his TSP does not allow him access to the investment options that have historically had higher returns .. There are only 5 main funds to choose from and a few target funds. In 2022, the TSP underwent a series of changes impacting its many account holders. These included the opening of a “Mutual Fund Window” to supplement the limited offering of investment funds previously available to plan participants- though the associated expenses make it prohibitively expensive for many participants. He will also not be able to make new contributions. Having one more account to keep track of can also be a headache for some people. Not only does it involve more work when balancing your assets, but you also must maintain more paperwork.

Option 2:

Again, John is limited to his new plan’s investment options. This is important if his new 401(k) plan has limited investment options or higher than average expense ratios, which cause lower returns. Some employers have a minimum waiting period before you can sign up for their 401(k) plan, so you may have to wait before you can rollover your TSP assets.

Option 3:

The biggest advantages of rolling over his TSP into an IRA is maintaining certain tax advantages, and controlling his investment options which are no longer limited to the investment options in the Thrift Savings Plan or his new employer’s 401(k) plan. Total control allows him to limit his expenses and maintain full control of his investment.

John Doe decides on option 3, simply because, when you can self-direct, you self-direct. John will now have control over his investments, he will have access to more investment options since his new employer’s 401(k) plan does not offer ideal investment options.

The process to get started is simple, and we are here to guide you through it. Contact us today for a tailored investment strategy on how your TSP can work as hard for you, as you worked for it.

The post I’ve retired from the Military, now working for Lockheed Martin, what should I do with my old TSP? appeared first on New Century Investments.