Federal employees have new options to withdraw money from their retirement funds after the TSP Modernization Act went into effect. Jessica Klement, staff vice president for advocacy at NARFE, says that federal employees were upset by the withdrawal restrictions they had before the bill passed.
“Over a third of the FERS participants in the TSP pulled their money out within one year of separating from service, whether that’s because they retired or took a job in the private sector. When you look at all the classes of individuals in the TSP, including military personnel, that percentage increased,” Klement said. “The TSP had a problem. People are taking all of their money out, or most of it, even though this is a great managed fund… the survey participants said we need to change the withdrawal options.”
Mark Keen, certified financial planner, Keen & Pocock, says the new options are more straightforward and present better solutions for partial withdrawals.
“Quite frankly, the old choices were restrictive and confusing. This is going to allow them to pull the money out as needed. Currently, they can take one lifetime partial withdrawal, that’s it then they have to take a full withdrawal option…” Keen said. “The new options are not only going to allow for monthly payments, but also quarterly and annual as well. More importantly, they will be able to change the amount whenever they want to.”