Now comes the hard part
Spending it is where plans fail.
The good news: a FERS annuity and Social Security cover the base, so your TSP only has to fill the gap.
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1. Why spending is harder than saving
For 30 years, payroll did the work: every two weeks, money went into the TSP, and a down market just meant buying shares cheaper. Retirement flips it. Now you decide what comes out, and a down market means selling shares cheap — dollars that never get the recovery.
That’s why the order of returns matters. Two retirees with the same average return can end decades apart if one hits the losses first.
2. See sequence risk with your numbers
An illustration, not a forecast. The deeper explanation is in sequence-of-returns risk.
3. Four defenses
- A cash cushion. One to two years of withdrawals in the G Fund or cash lets you avoid selling stocks in a slump. See the bucket strategy.
- Flexible spending. Trimming withdrawals after a bad year protects the plan far more than it costs your lifestyle. See guardrails.
- A bigger guaranteed floor. Delaying Social Security raises an inflation-protected check for life. See when to claim, federal edition.
- The right order. Which account you tap first changes your taxes for decades. See withdrawal order.
Your TSP gives you the tools: monthly installments, partial withdrawals as often as every 30 days, or a life annuity. See TSP withdrawal options.
4. Frequently asked questions
Why is drawing down retirement savings harder than saving?
Saving was automatic and forgiving: a bad market year just meant buying cheaper. Drawing down runs the other way. Withdrawals during a market drop sell assets at low prices, and those dollars never recover, so the order of returns in the first years of retirement can matter as much as the average.
What is sequence-of-returns risk?
It is the risk that poor returns arrive early in retirement, while you are withdrawing. Two retirees with the same average return can end up very differently if one hits losses in the first few years and the other hits them later.
How can I protect against a bad market early in retirement?
Common defenses include keeping one to two years of spending in cash or the G Fund, cutting withdrawals modestly after a bad year, delaying Social Security so it covers more of your spending, and covering essential costs with guaranteed income such as your FERS annuity.
When do required minimum distributions start?
Under current law, at 73 for people born from 1951 through 1959, and at 75 for people born in 1960 or later. Roth balances in the TSP are not subject to RMDs during your lifetime.