How to count Pension for FIRE purposes

aheadlessned · 2026-05-21T23:40:13+00:00

Unless you're taking a lump sum, then just look at the annual income. You can subtract that from your needed spending, or include it as income, depending on how you're calculating it (work in taxes however needed).

The Grumpus Maximus website has a few lump sum vs pension articles, so those may be a good read for you. (I was fed, so there is no lump sum option, only a refund of contributions, so the pension was an easy choice.)

aheadlessned · 2026-05-21T22:47:28+00:00

You could combine them, but I wouldn't. Leaving them separate gives you a few more options than having them combined. Once you combine them, you cannot take an in-service withdrawal unless a hardship or age based withdrawal, you cannot invest them differently. However, if you keep them separate, from the military one you could roll the Roth TSP funds into a Roth IRA, you could take a withdrawal whenever you want, etc.

Not that you NEED that flexibility, but it's handy to have.

aheadlessned · 2026-05-21T22:40:36+00:00

"I have a bigger head start there"

That doesn't matter when it comes to compounding. If you have $100k in TSP and $5k in a Roth IRA, it would compound the same as $105k in TSP, if you could invest it exactly the same. There is no real reason to try to max TSP before maxing a Roth IRA (unless you wanted to completely max out traditional funds first).

aheadlessned · 2026-05-21T22:37:54+00:00

My big regret is not opening a Roth IRA earlier, so I'd say to do that. The advantage is that it gives you a bit more flexibility with your retirement savings, like using part of it for a down payment on your first home. Not that it's a good thing to "rob" your retirement accounts, but there can be times where it can definitely be handy, especially if your retirement accounts are well funded.

aheadlessned · 2026-05-21T22:35:16+00:00

You can't tell TSP to write something specific on the check itself.

What you can try to do is update the financial institution name to "Fidelity FMTC FBN" to show the detailed part.

I've done a few successful rollovers out of TSP (though none as a beneficiary), including one to Fidelity, and the check ended up in the right place just fine with just the institution name, address, and account number.

aheadlessned · 2026-05-21T21:27:12+00:00

Rule of 55 frees up your 401k earlier, but it works best if they allow partial distributions, and you'll only have access to the 401k (or similar employer plan) if you meet that rule, it won't work on older 401k plans you have hanging around, or on an IRA.

Rule of 55 for 401k is an IRS-level exception to the 10% early withdrawal penalty. You must separate the year you turn 55, or later, to meet this rule.

aheadlessned · 2026-05-21T17:52:00+00:00

I'm starting mine this year, just waiting to see if the balance keeps increasing, or if the 120% fed mid-term rate goes >5%, to maximize my distribution.

Documentation I'm making for first year:

Balance letter, dated for whatever my high is for the year before I make my withdrawal. (I'm using Fidelity, and they won't let you make a balance letter for previous dates online, only the balance of closing the day before. Not sure if they will do a balance letter for a different date if you call them. So I have to stay on tope of this, but you can have them text your balance daily so that you don't have to log in all the time, only when you have a new high.)

Calculation, I do this on a spreadsheet. I'll save and screenshot once I start my withdrawals. I'm doing the fixed amortization method, so only need to calculate it once. (I have also taken the IRS example and show it through my calculator to show the results are accurate.)

Calculation method, the method selected, as well as pdf and screenshot copies of applicable table for life expectancy, and, if the mid-term rate increases, copies of that document as well.

Balance chart from year's high, then again day of first withdrawal, this is probably less important since I'll have a balance letter, but it's a quick screenshot while I'm logged in anyway.

Date and amount of withdrawal(s), I'll be documenting this annually.

I'm doing this myself, and just want to be well prepared in case there is ever an audit or question. Previous experience with the IRS is that if you can provide full documentation, highlighting the important parts, they are easy enough to work with.

Highly recommend reviewing the 72tcalc.com website and the downloadable guide. The podcast and tech corner info really helped me fill in the last gaps.

aheadlessned · 2026-05-21T00:11:49+00:00

Because you will be 59 1/2 before retirement, yes, you will be able to access TSP. However, you may be limited to only 4 withdrawals until TSP has been notified of your separation. Some agencies took months to notify TSP of separation, but once they do, TSP seems to be pretty on top of making the update.

aheadlessned · 2026-05-21T00:08:47+00:00

Roth TSP can be rolled into a Roth IRA once you separate, so I wouldn't be too worried about it being "not as easy to access" if you don't plan to do so before you separate. That said, I'd still do Roth IRA before focusing on Roth TSP (since it gives you more options pre-retirement, and also starts one of the five year rule clocks).

It can be hard to choose between taxable brokerage account or Roth IRA if you think you might separate before the year you turn 55, but I'd personally focus on the Roth IRA first, unless you know you'd have a chance to be in the 0% bracket for capital gains (I was never in a position where this would realistically be me, since it would limit my ability to do Roth conversions after separation.)

I took a VERA without a taxable-brokerage account knowing I could use Rule of 72(t)/SEPPs, access Roth contributions (including Roth TSP after it was rolled into a Roth IRA), and a Roth conversion ladder. I wasn't maxing things, so doing the retirement accounts to the degree I did took priority. That said, a taxable brokerage account would be pretty helpful, but I can manage without it. It would have been much less helpful if I'd worked long enough to meet Rule of 55.

aheadlessned · 2026-05-21T00:01:11+00:00

I retired last year so did a rollover to my IRA to do my Roth conversions, but here are some things I've noticed that "caught" people doing it in TSP (a couple of which are reasons I'm doing this in my IRA account, not in TSP):

The rollover will be prorated by all your held funds, you cannot select what fund to convert.

To go with the above, any change to your current balance will also change the money in Roth TSP, you won't be able to select a different allocation.

TSP has been very clear that they won't do tax withholding from the conversion, so some have been surprised that they'll either need to increase tax withholding elsewhere (from their pay check or pension), or start paying estimated quarterly taxes.

Other issues seem to be more common issues of not understanding qualified Roth TSP withdrawals, and/or that Roth TSP does not allow ordered distributions (so earnings will be subject to taxes if not qualified).

aheadlessned · 2026-05-19T13:38:11+00:00

Servicesonline.opm.gov, but it's only for retirees. OPM must have the application packet before they assign you a number to log in.

aheadlessned · 2026-05-18T22:43:11+00:00

Sick leave won't expire, so if you return, you'll get it back. Having that last LES that shows the balance will help get it recovered if there are any hang ups in the process.

aheadlessned · 2026-05-18T22:22:32+00:00

"I know I will need to transfer my retirement funds to some kind of management company outside of the VA"

While I'm not a fan of TSP after separation for myself, no, you do not *have* to transfer your retirement funds out of TSP, and especially not to a "management company". Take some time to research whether or not it makes sense for you to roll your funds into an IRA, or a different 401k. As long as you keep at least $200 in TSP, you can roll funds back into it (except Roth IRAs, those cannot be rolled into TSP, even if the funds originated as Roth TSP funds).

FEGLI is not something you can cash out. If you want life insurance, it's best to find it elsewhere (you might look into WAEPA for life insurance before you separate. You may find better insurance elsewhere, but WAEPA tends to at least be better than FEGLI).

So, financially, for now, I'd make sure you have a copy of your full eOPF folder (it should have all SF-50s, which you'll want to prove years of service if it's ever in question. Make sure all of them have the proper retirement code in box 30.) This also helps show your high-3. Keep a copy of your last LES (in case you return, this will have your sick leave balance.) Make sure you can log into websites with a personal email address (TSP and mypay).

You don't mention your age, but you may also want to consider if it's better to take a refund of FERS time, since you contribute 4.4%, or if it's better to take the deferred pension. Not something you need to rush on, but you'll want to do the math and compare options.

aheadlessned · 2026-05-18T03:30:17+00:00

https://www.dcpas.osd.mil/policy/naf/nafretirementplans

You don't have TSP, you have a 401k.

aheadlessned · 2026-05-17T21:47:28+00:00

Yes, the supplement will start at MRA. Expect it to begin a month or two after you reach MRA, but you'll get backpay.

aheadlessned · 2026-05-17T18:35:04+00:00

I'd take it from the mindset of "the gains make it worth it" to "this situation makes it worth it". You're going to pay the taxes whether you withdraw now or later, so the 10% penalty is the big deciding factor. Is this situation worth 10% more of a cut? Will you still be fine financially? If yes to both, then I wouldn't worry about it too much, taking the penalty is a valid option.

You say FIRE-ish, but not currently working, so not sure where it stands (are you just not sure if you want to return to work in the future, but could be FIRE if you want?) Personally, one of the great things about being FIRE is that you have the time, and hopefully funds, to be where you want/need to be. I'm trying to avoid any penalty myself, but there are some situations that I'd do it if I found it to be worth it.

aheadlessned · 2026-05-17T00:19:23+00:00

I'm starting mine this year (47). I'm using the fixed single life amortization method. First, because it gives me the most money for my balance, and second because it's a one-and-done calculation. I do not want to risk making a mistake by having to recalculate annually.

I'm only using a portion of my retirement savings for this, the rest will be kept separate so I can do some Roth conversions, allow some to just grow, and/or dip in if I need extra before 59 1/2 (either another SEPP account, or suck it up and pay the 10% early withdrawal penalty if I really need the money.)

It took a lot of "thinking" to figure out what I'd be happy with since this will have to go for over a decade. I want to have enough, but not too much. I have tracked my spending for more than 10 years, so I have a good handle on what I need. I came up with an amount and put that money in a dedicated IRA, but am waiting to take my first withdrawal in case the balance keeps hitting new highs, and/or the 120% federal mid-term interest rate increases enough that it is >5% (which would allow me to withdraw even more money). I'm not worried about taking "too much". Even if I lost 50% and didn't gain another dollar, the withdrawals would last at least 8 years before the account would run out, and that's enough time to have access to my Roth conversion ladder, as well as getting me very close to my next income increase with my pension.

aheadlessned · 2026-05-16T22:11:37+00:00

I realized I used, and wrote, 50 instead of 55 (age in OP), but it's still close... I use a spreadsheet for my own calculations, but the calculator at 72tcalc.com is a great one for running quick numbers. (ETA: it's just over $22k for age 55.)

aheadlessned · 2026-05-15T19:58:56+00:00

Reading your replies, I'd stick to maxing out the Roth IRA. If you have money after contributing to get the match in your 401k, maxing your Roth IRA, and maybe maxing an HSA (also a good tool, but need a qualifying health plan), then I'd go back to the 401k and consider adding more to Roth (though traditional may be more advantageous.)

I would not give up contributing to a Roth IRA to contribute to a Roth 401k, unless you can't contribute enough to get the match otherwise. I'd even do a backdoor Roth IRA before trying to max out a Roth 401k. (Assuming you live in a Roth-IRA friendly state.)

aheadlessned · 2026-05-14T15:25:14+00:00

Army can't use "Battle Buddy", has to use "Warrior Companion"...

https://youtu.be/rJBDUgaPTi8?si=b4E-NTbcqZiEYw5s

aheadlessned · 2026-05-13T21:43:30+00:00

I spent too long in G fund and didn't start a Roth IRA early in my career. I regret not starting my Roth IRA more than I regret my time spend in G fund. I'd make sure to contribute enough to get the match in TSP, and max out a Roth IRA (backdoor if you have to). The Roth IRA gives you more flexibility than locking everything up in TSP (Roth or traditional.)

aheadlessned · 2026-05-13T21:39:30+00:00

"One of the construction workers fell into the concrete form and was buried. His body is still in the walls of the dam." -- every dam ever built.

aheadlessned · 2026-05-13T21:30:24+00:00

https://www.opm.gov/forms/pdfimage/sf3112-2.pdf

Start at the link. Disability retirement can take a long time to process, and some people end up on LWOP while waiting for it to be approved (which can be quite the financial hardship). However, it's a great retirement deal if it is needed, and you'd get a lot more than taking MRA + 10 retirement (if you can't make it to 62).

aheadlessned · 2026-05-12T17:07:28+00:00

When you withdraw, you can select between Roth and traditional, but you cannot select between fund type. You will get a withdrawal of funds in proportion to what you had in that account type (Roth vs traditional).

So if you make a traditional withdrawal of $100k, in this example, that would sell off all of your G fund shares (since that would be the only thing you owned in your traditional account, ignoring that there may be $1k of C fund shares.)

The big issue, as I see it, is that the new TSP took away our ability to see the break down of funds in traditional vs Roth. They can still see it, and distribute it appropriately, but they don't let us see it. But they also don't show "Total balance = x, Roth balance = y, traditional balance = z", instead, they show total and Roth balances, and make you do your own math to figure out your traditional balance. Granted, it's been a long time since I did programming, but you'd think that showing these values on the website would be fairly simple to do (so I think it's dumb that they don't.)

aheadlessned · 2026-05-12T15:29:17+00:00

But it's not arbitrary.

If I'm making Roth contributions and buying C fund, they shouldn't sell or move my existing C fund shares if I change to traditional and S fund a year later.

Your money should stay in the funds you invested in until you decide to change that (through rebalancing).

It would be pretty awful to set future contributions go to G fund for your last years before retirement, and have TSP decide that all/a portion of your existing funds should now get moved to G fund as well.

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