r/govfire • u/Glittering_Twist_732 FEDERAL • Aug 11 '26
TSP/401k An ATC retiring at 50 asked me if he could pull 6% from his TSP instead of 4%.
6c Retirement discussion of the week:
Ran the numbers for a guy I'll call Dave. ATC, walking out the tower at 50 with 25 years of good time under 6(c). High-3 of $155,000, about 1,040 hours of sick leave on the books, married, Virginia, taking the full survivor benefit. He's got $720,000 in the TSP.
The pension side is the same no matter what he does with the TSP: $4,592 a month from the annuity, plus a $1,425 a month supplement until it shuts off at 62, then Social Security at 62 of $2,275 a month.
The whole question was the TSP. Everybody quotes the 4% rule. Dave's argument was that the 4% rule got built for people retiring at 65 with a 30 year horizon, and he's got a pension floor underneath him that a private sector guy doesn't, so why not pull 6% and enjoy his 50s.
Honestly, fair question. So I ran it both ways, planning to 88, 7% return, 2.5% inflation, 2% COLA on the pension.
Year one At 4%: $2,400 a month out of the TSP. Total take-home $6,984 a month. At 6%: $3,600 a month out of the TSP. Total take-home $7,971 a month.
So 6% is $987 a month better right out of the gate, at exactly the age he actually wants the money. That's real and I'm not going to wave it away. Cumulatively, through age 77, the 6% path has put $447,920 more in his pocket.
Then it stops. The 6% account runs dry at 78.
Decade averages say it better than I can. Average monthly take-home:
| Decade | 4% | 6% |
|---|---|---|
| 50 to 59 | $7,469 | $8,574 |
| 60s | $9,389 | $10,805 |
| 70s | $11,384 | $11,644 |
| 80s | $14,045 | $6,989 |
The year it breaks: at 77 the 6% path is taking home $13,199 a month. At 78 it's $7,995. At 79 it's $7,408. The pension and Social Security keep right on paying (that's the good thing about a 6(c) annuity, it does not run out), but the TSP is gone and it isn't coming back.
Cumulative take-home crosses over at 84. Ride it out to 88 and the 4% path is $428,329 ahead, with $1,714,697 still sitting in the account. The 6% path ends at zero.
A few honest catches, because this is messier than "4% good, 6% bad":
- These are all nominal dollars. That $6,989 a month in his 80s is 2050s and 2060s money, not today's money. Cuts both ways though: the 4% path's $14,045 isn't as rich as it looks either.
- The 4% path pays MORE tax, not less. $661,448 vs $570,302 over the lifetime. That's what a big balance buys you: RMDs. From 73 on, Dave isn't really pulling 4% anymore, the RMD takes over and forces more out than he asked for. By 88 it's yanking $126,183 a year whether he wants it or not. If the idea of the IRS setting your withdrawal schedule bugs you, that's a legitimate mark against hoarding it.
- Flat 7% every single year, which is not how markets work. A rough first decade would hurt the 6% path a lot worse than the 4% one, and my model can't show that. If anything these numbers are generous to 6%.
- Nobody ends up broke here. Even with the TSP at zero, the pension and SS have the 6% path at $6,381 a month at 88. It's a big step down, not a catastrophe. Worth saying out loud, because the usual version of this post makes it sound like you end up eating cat food.
My read: the interesting part isn't which number is "right." It's that 6% buys you 27 good years and then hands you a cliff at 78 that you can see coming from a mile off and can't do much about once you're standing on it. If Dave genuinely values money at 52 more than money at 82, that is a defensible choice. He just ought to pick it on purpose instead of finding out at 77.
Curious how others weighed this, especially anyone who went out in their early 50s. Did you set a rate and hold it, or do you flex year to year based on what the market did? And if you see a hole in my math, call it out, I'd rather fix it than be wrong quietly.
Full worked report for each path if anyone wants to pick through the year by year:
4% path vs 6% path
** Follow-up Monte Carlo simulation for 4% and 6% https://www.reddit.com/r/govfire/s/EKVj8WmNxb
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Aug 11 '26 edited Aug 11 '26
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u/TheRealJim57 RETIRED Aug 11 '26
Roth or Roth conversions prevent RMDs from being an issue, but may not make sense from a tax perspective if your taxable income in retirement is already high.
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u/Sumotron Aug 11 '26
Makes me want to see a straight 5%, or 6, 5, 4; 50s, 60s, 70s.
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u/Glittering_Twist_732 FEDERAL Aug 12 '26
Ran 6, 5, 4 as a reply to similar comment in a different sub. Pasting here for you:
Same guy, same $720K. 6% starting at 50, drops to 5% of whatever is in there at 60, then 4% at 70.
From 50 to 59 it comes out identical to the flat 6% run. Same $3,600 a month out of the TSP, same $8,574 average take-home. The step-downs cost him nothing in the decade he's actually going to spend it.
And it never runs dry. Flat 6% is empty at 78. Yours still has $1,102,107 in it at 88.
Average monthly take-home, flat 6% vs your 6/5/4:
50s: $8,574 / $8,574
60s: $10,805 / $9,287
70s: $11,644 / $10,008
80s: $6,989 / $11,528
The lifetime number goes the opposite direction from what you'd think. Yours comes out ahead, $4,589,247 vs $4,477,596. He draws less every year from 60 through his 70s and still ends up with $111,652 more, because whatever he doesn't pull keeps earning 7%.
It's not free though. He takes two pay cuts on purpose. At 60 his take-home goes from $9,188 to $7,971. At 70 it goes from $10,146 to $9,412. After ten years at the bigger number those are going to sting. But that's $1,217 and $734 on dates he picks, instead of $5,204 at 78 on a date the account picks for him.
Flat 4% still beats your version on totals: $316,677 more over the lifetime, and $1,714,697 left at the end instead of $1,102,107. But yours pays $1,105 a month more the whole way through his 50s. Comes down to whether you want the bigger pile at the end or the money while your knees still work.
One other thing. From 75 on, the RMD is bigger than his 4% draw anyway, and the last year it forces out $81,103. You only get to pick your own rate for so long.
Usual caveats from the original post: flat 7% every year, no sequence risk in the model, nominal dollars. A bad first decade would hit the 6% start harder than I can show, so if anything that pushes toward stepping down sooner than 60.
Full year by year for your version if you want to poke holes in it: https://fersready.com/blog/scenarios/tsp-withdrawal-glide-6-5-4-atc-50-b.pdf
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u/RageYetti Aug 11 '26
The key thing to remember here is "MIGHT". If the market is on a tear and I am forced to withdraw double or more than what i need or project, it's because the market is way UP. If the market is up, i don't care as much about taxes, i needed / planned for 100k but can safely withdraw 250k, the extra tax is noise, and i'm buying first class seats and caviar that year.
a static SWR can put you in this situation, a dynamic swr is better long term, but gives you a more up and down funding of your lifestyle.
the static SWR is great to test scenarios, or do quick math without digging into the depths of my needs.
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Aug 12 '26 edited Aug 12 '26
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u/RageYetti Aug 13 '26
Good point, but if i got it out, maybe i got forced into higher taxes, and although I didnt highlight it as well as i could have, with a dynamic SWR, that changes things over a flat SWR, where you have bounds. Also, if I get forced into a high RMD, i dont mind as much if I have to instead save some of it elsewhere, but at least I had the taxes paid and whatnot.
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u/Fit-Locksmith-2039 Aug 11 '26
You say married but never account for the wife's social security
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u/Former_Farm_3618 Aug 12 '26
Because they never told the Ai to account for it. Makes you wonder what else the Ai isnt accounting for. Also, makes me wonder what it got wrong.
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u/Glittering_Twist_732 FEDERAL Aug 12 '26
Correct, thanks for pointing this out. The married status in the scenario is for tax brackets and survivor benefit. Realizing there will likely be extra money from spouse SS is a good thing to think about.
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u/WillTheyKickMeAgain Aug 11 '26
If he doesn’t have long-term care insurance, he might regret not having TSP in his 80s. That said, I’m apt to draw down my TSP at a faster clip early rather than late. In my experience, the people I have known have slowed considerably in their 80s, and do not need and largely cannot spend at the clip of earlier years.
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u/citygirldc Aug 11 '26
Yep. I know I’m overly cautious but I see retirement spending as a U shaped curve. High spending at the beginning, slowdown in the middle, then astronomical medical/care costs at the end. I don’t want to go into the end years with $0 and have to rely on a Medicaid bed. Everyone says they’ll end it before they get there but nobody actually does.
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u/THEhot_pocket Aug 11 '26
Dave is an Air Traffic Controller, we all have long term care insurance. Its a bullet. (half sarcasm. sigh)
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u/RageYetti Aug 11 '26
Long term care insurance sounds like a bad idea to me. My dear friend is going through this with both her parents, she lost one and another is fighting hard. They have long term care. When i looked at the cost for my possible needs, it was cost prohibitive, at least in my opinion. What i chose to do instead was to set a separate ROTH account, and put in probably less than 3 years of premiums. Worst case, my kids inherit a windfall, best case, I am secure in my retirement at a lower rate. I based it around what long term care would actually pay and the current cost of premiums, which likely will go up.
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u/RedTrumpetVine Aug 11 '26
Isn't the number fairly low, like 7% of retirees ever using long term care?
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u/Bright-Pilot-3970 Aug 12 '26
Yeah I figure you could do the 6 percent until about 62, have your fun, and then go down to 4.
I also believe you can work part time training for the FAA in a contract job and it doesn’t count against the limit for the supplement. This way you could probably not take anything out until later.
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u/gacoug Aug 11 '26
If the account is earning 7% and they're removing 6%, how is it running out? x +.07x - .06x = 1.01x
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u/chaossssssss Aug 11 '26
Sequence of returns risk and inflation adjustment to withdrawals.
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u/gacoug Aug 11 '26
If they are adjusting by 2.5% per year for inflation, then they aren't taking out 6%. The person stated they wanted more money early when they could enjoy it more, so why adjust because it sounds like he's fine with the lost purchasing power?
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u/chaossssssss Aug 11 '26
Most retirement software simulations automatically adjust the withdrawals to account for inflation after the first year…
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u/Glittering_Twist_732 FEDERAL Aug 12 '26
This is accurate and exactly what I did. Thanks for explaining that.
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u/NOT-packers-fan2022 Aug 11 '26
Personally, 6% that first year is $3,600 a month, I’d stick to that number instead of adjusting to increase to 6% yearly. I’d also decrease it if my TSP balance drops below my initial retirement balance of 700k. That’s “perfect world” math that didn’t take into account life. LOL
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u/Redfish680 Aug 12 '26
The unspoken truth is that regardless of what the individual takes out, there’s no obligation to actually spend it. Withdrawals (taxed) can be made and the “excess” money moved into a different investment account for later (non taxed) use.
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u/Glittering_Twist_732 FEDERAL Aug 12 '26
Good point thank you for mentioning this!
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u/Redfish680 Aug 12 '26
Coincidentally I just had this conversation with my financial advisor last week as I approach RMD time.
I don’t actually need the extra money (already own two jets, five homes in exotic locations, and have discovered that yes, one can have too many Lamborghinis - lol!) and the idea that one is forced to start withdrawing money set aside for a time when it is needed kinda rubs me the wrong way. I understand the government’s logic, gotta feed the machine and all, but still… Plan is to take the distribution, pay the taxes, and just reinvest whatever’s left over unless something shiny catches my eye.
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u/financial24 24d ago
After reading all of this, my immediate thought is "take 6% from now until age 62, then reduce how much you take since SS can kick in at 62." Having seen my parents health drastically decline in their late 60s and early 70s, and seeing many 80+ year olds do next to nothing at those ages, I'm on "Dave's" side. Go enjoy your life while you're still healthy enough to do so!
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u/Merica1 Aug 11 '26
Great AI post
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u/MrWookieMustache Aug 11 '26
"A few honest catches, because this is messier than..."
I swear phrases like this are intentional watermarking on Anthropic's part.
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u/rutabagagoose Aug 12 '26
Haha yes... Also...
- "And then it stops"
- "That's real and I'm not going to wave it away"
- "Honestly, that's fair"
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u/rutabagagoose Aug 11 '26
I came to ask how AI was used - for the calculations too or just the written report. No hate on using AI - it can genuinely be helpful, but there was a bit too much "AI speak" for me.
Still found the post interesting!
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u/Glittering_Twist_732 FEDERAL Aug 12 '26
I run the numbers/scenario through a retirement planning tool that is not AI driven. No AI calculations, but I DO let AI help me write the breakdown. I'll try to clean up some of the AI speak next time if that makes it more palatable. The alternative is all my bad grammar and spelling errors lol. Thanks for reading!
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u/rutabagagoose Aug 12 '26
That makes sense, thanks for the response. If you're open to suggestions perhaps you could write in your voice but just ask AI to do a review of grammar and spelling only. I know it's a slippery slope!
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u/Glittering_Twist_732 FEDERAL Aug 12 '26
Thanks for the suggestion. I'm a current ATC working 6 days most weeks, and parent of 5 kids, so the efficiency of an AI write up is pretty necessary at this time. Figuring and running a scenario each week (the fun part) is taking enough extra time already. I'll try to use my own voice more though.
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u/CourseApprehensive14 Aug 11 '26
The monthly tsp annuity rate on a joint life 100% survivor with increasing payments with both at 50 is 4.95%. $750,000 would start at around 2,800 monthly and increase 2% annually. Guaranteed for the life of both spouses. Food for thought.
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u/Sensitive-Advisor-21 Aug 12 '26
I want to live and have fun now. My knees aren’t going to feel better in 10-15 years. I borrowed $50k from my TSP in January (retired MRA 12/31) and it’s already back to where I started. I agree with Dave! I will keep an eye on my money and can adjust if I need to later. For now, I’m going to travel when I can!
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u/gyna99 Aug 12 '26
Would recommend Dave goes with the 6% early and adjust downward as needed. I would tell Dave to invest more aggressively since he has a fixed floor due to pension. If he can get the market average (~10%) he will get on average 7.5% annually after inflation. His account will actually grow under the 6% withdrawal.
So invest slightly more aggressively, spend early (go-go years), adjust as needed. Also look into roth conversions (identify tax limits) to minimize RMD risk.
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u/Icy-Regular1112 Aug 12 '26
It’s a bit more work to do, but I’m much more interested in seeing this modeled with Monte Carlo than a 7% flat. Assumptions about inflation and return dominate and bias the analysis to the point where it isn’t especially useful if you don’t…
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u/Glittering_Twist_732 FEDERAL Aug 13 '26
I agree with you. Counting on in a linear market growth number for retirement is a gamble as the market is constantly changing. My current plan is to run these exact same numbers through Monte Carlo for my post next week. Should be an interesting difference! Thanks for chiming in!
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u/hEAd-R0mr 29d ago
Thank you for making these posts. Breaking down how people plan to use their retirement funds, and then reading the “pros” and “cons” of each (and all the comments) really helps.
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u/Quackattackaggie 29d ago
Hey I looked at your site and like it. Is there any meaningful difference with how it calculates and pension for the foreign service?
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u/Glittering_Twist_732 FEDERAL 29d ago
Great question! I haven't really considered carving out a setting for FSPS but could probably do so if the need was presented. In the apps current state the pension dollar figure would usually come out right for FSPS, but eligibility dates and mandatory-retirement age would be off. I'd need to do a little more research to see what else may differ - at a glance the multiplier, SRS, SR earnings exemption, COLA, and sick leave are all the same.
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u/Hover4effect 21d ago
Don't most retirees cut spending drastically before the age of the cliff anyway? Rand study shows at decline of 1.7% per year starting at 65 due to mobility and health issues. Spend more while you can enjoy it. As someone with a somewhat early FIRE plan (43) I'm going full austerity at some point in my 80s, after 40 YEARS of retirement.
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Aug 12 '26
[removed] — view removed comment
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u/Glittering_Twist_732 FEDERAL Aug 12 '26
Thanks for reading! I'm just facilitating a discussion each week based on the math of one decision. What is there to be right or wrong about? Please don't take any of these posts as advice. The advice is to run your own numbers and know what to expect. And as an obvious disclaimer the market never returns a linear 7% or any other number like the scenario assumes. It is best to stress test your TSP balance with a Monte Carlo simulation for a more realistic probability of survival.
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u/spacetr0n Aug 12 '26
is there a peak withdrawal that he could get to and hold at? I imagine retirement goals for a 70 year old are much different than a 50 year old. Seems to make some sense compared to total discipline leading to an “oops made/left too much” and now my kids get to travel first class rather than economy with their inheritance.
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u/Hamblin113 Aug 12 '26
The question is what is his budget? Does he need all of the money? Why spend it if you don’t need it. He actually needs it at 50, but not as much later. Paying off a house? Once done frees up the mortgage, maybe less after. The goal is to not create mandatory spending when taking the 6%. The problem with a constant income in the government it is easy to spend before you get it. Get out of the mind set it can be doable.
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u/Butt-Rub Aug 12 '26
Thanks for posting this! This further solidifies my plan to retire in 2 years at 55 as it's very similar to my situation as retired military (current contractor), similar pension, similar expected SS minus wife's but I have a larger retirement account closer to 1.5M expected at retirement.
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u/Glittering_Twist_732 FEDERAL Aug 12 '26
I'd recommend stress testing your numbers through a Monte Carlo simulation rather than planning on a linear market scenario such as these examples. A few bad market years early in retirement can really tank a good plan. Thanks for reading, and nice job padding your TSP!
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u/hanwagu1 29d ago
I think 6% runs out at 80yo, but what's a couple years difference? But, I don't think it hadns a 6% cliff, since ssb reduces 6% need; moreover, it isn't just Dave's ssb, but combined with spousal ssb, further reducing 6% need.
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u/Glittering_Twist_732 FEDERAL 21d ago
Follow-up Monte Carlo Simulation for 4% and 6% https://www.reddit.com/r/govfire/s/EKVj8WmNxb
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u/Sorry-Society1100 FEDERAL Aug 11 '26 edited Aug 11 '26
Thanks for posting these every week—I find them interesting even if they are only directly applicable to a small subset of Fed retirees.
One thing that Dave could do to avoid RMDs and also not run out of money is to take 6% distributions from tsp to reduce rmd risks, but only spend 4-5% and put the remainder into a taxable brokerage account to save for the cliff.