Retirement consultants from our office present over 50 Federal Retirement Workshops in a year throughout the Greater Washington DC Metropolitan area.  The number one question we get is, “What should I do with my TSP in retirement?”

In many ways I feel like this question is a test since strong opinions exist regarding leaving the money in the TSP for the low expenses or taking away from the government because the government is unpredictable.

I can say, based on my years of experience, some people should keep their TSP and others should move their money out of the TSP in retirement.  Here’s the thought process I would like you to go through when determining what would be best for you.

1)  Identify all of your assets (retirement accounts, investments, home equity, social security income, pension income).

2)  Determine how much money you will need for income based on the lifestyle you want to live in retirement.

3)  Evaluate how to maximize your pension and social security and determine the income you will get from these two sources as well as other fixed income (i.e. military pension and other defined benefit plans).

4)  Create an Income Plan for the difference between 2 and 3.  Some will choose to use a portion or all of their retirement accounts for income.  In that case, the best income producing accounts exist outside of the TSP options.

5)  Leave money set aside for flexible use.

Whatever assets are not needed to maintain quality of life should be set aside for discretionary spending.  Naturally, the investment objective is different for these monies than the income generating monies.  A portion of your TSP may be appropriate in this category.

Most near-retirees should note that the answer to most retirement questions rests in the distribution plan for retirement over product comparisons.  My best advice concerning the TSP, is to figure out how to use it most effectively in your own plan.