TSP Share Prices and Withdrawal

Federal employees who are considering a TSP withdrawal after leaving federal service tend to spend a whole lot of time figuring out complex investment and TSP withdrawal strategies to optimize the returns and minimize the tax hit. However, most of it is based on choosing the correct TSP withdrawal option for you, which can include a full or partial TSP Withdrawal, a single payment, monthly payments, a TSP lifetime annuity, or a TSP to IRA rollover, etc.

However, a seemingly wasted effort is to focus solely on TSP share prices. Many federal employees spend an inordinate amount of time looking at the TSP fund performance page where you will find daily, monthly, annual, and historical share prices for the individual core TSP funds, as well as all the Lifecycle (L) funds.

Do TSP Share Prices Make a Huge Difference in Your Withdrawal Amount?

The primary impact of TSP Share prices on the timing of your TSP withdrawal is more dependent on what you will be putting your TSP funds into after you leave federal service. If you are going to put your money into a money market account after you retire then yes, the TSP share prices on the day you perform your TSP rollover will become incredibly important as you would seemingly be putting your money into a low or no growth account.  But if you are going to explore other TSP alternatives with a highly-qualified TSP expert, then you are likely to realize that a TSP to IRA rollover could give you access to thousands of potential TSP alternatives that may make the TSP share prices on the date of your rollover far less important.

Another option that some federal employees make is to elect a TSP annuity upon retiring from federal service.  Although the attraction of guaranteed lifetime income offered by the Thrift Savings Plan annuity may seem attractive at first we always recommend that retirees compare this option against alternatives.  It is our experience that the TSP annuity may not be the best option.  If you do choose the TSP annuity then, yes, the current value of your TSP funds will become very important as the initial value of your TSP annuity will determine your lifetime income, without the potential of growth beyond the prescribed amount offered through the TSP.