How to Transfer Out of the WSIB TAP Fund in Washington State
Understanding how your retirement funds are managed is crucial, especially if you’re a Washington State employee participating in Plan 3. Whether you’re part of TRS 3, PERS 3, or SERS 3, one aspect you cannot overlook is where your money is invested. This guide provides a detailed breakdown of the WSIB TAP Fund, the self-directed option, and how to navigate the transfer process to ensure a smooth retirement journey.
What Is Plan 3?
Plan 3 is a retirement system available to Washington State employees that combines defined benefit and defined contribution elements:
- Defined Benefit: This is your pension, managed by the state, providing a guaranteed monthly income based on your years of service and salary. You don’t need to manage this portion directly.
- Defined Contribution: This is where your contributions go, and you are 100% responsible for deciding how it is invested. The defined contribution portion is where you can encounter the WSIB TAP Fund or the self-directed options.
Understanding the WSIB TAP Fund
The Washington State Investment Board Total Allocation Portfolio (WSIB TAP) is the default investment option for many Plan 3 participants. If you’ve never selected your investment strategy, chances are your money is in this fund.
Key Features of the WSIB TAP Fund:
- Aggressive Investment Strategy: The TAP fund primarily focuses on growth but comes with higher risk due to market volatility.
- Default Option: If you started contributing before 2015 and haven’t logged in to change your investment, your funds are likely in the WSIB TAP Fund.
- Delayed Access: One of the most significant drawbacks is the time it takes to transfer or withdraw money, often requiring up to 60 days.
While the WSIB TAP Fund can provide decent growth, its rigid withdrawal and transfer timeline can become problematic, especially during retirement when you need funds promptly.
Why Consider Moving to a Self-Directed Option?
Flexibility
Self-directed accounts allow you to select and manage your investments, such as mutual funds or index funds. You can diversify your portfolio to match your financial goals and risk tolerance.
Faster Access to Funds
Once your money is in the self-directed account, withdrawals typically take only a week or two, as opposed to the 60-day waiting period with the WSIB TAP Fund.
Greater Control
With a self-directed account, you have the power to adjust your investments based on market conditions, retirement timeline, or personal preferences.
Step-by-Step Guide to Transfer Out of the WSIB TAP Fund
1. Log in to Your DRS Account
Start by logging into your Washington Department of Retirement Systems (DRS) account. Navigate to the section for Plan 3 investments.
2. Identify Your Current Investment Allocation
Check whether your funds are in the WSIB TAP Fund or the self-directed option. Look for keywords such as “TAP” or “WSIB Investment Fund.”
3. Request a Transfer
If your funds are in the WSIB TAP Fund and you want to move them:
- Submit a request to transfer your money to the self-directed account.
- Specify the investments you want on the self-directed side. If you’re unsure, consider consulting a financial advisor or using a service like the Plan 3 Investment Service.
4. Understand the Timeline
Here’s how the transfer process unfolds:
- Monthly Processing Date: Changes are processed on the 28th of each month. For example, if you submit a request on November 5th, the changes won’t be processed until November 28th.
- 30-Day Holding Period: After the funds are sold on the 28th, they enter a holding period for approximately one month, during which they are not actively invested.
- Final Transfer: Once the holding period ends, the funds are deposited into the self-directed account and allocated according to your selected investments.
5. Plan Ahead for Retirement Withdrawals
If you’re nearing retirement and anticipate needing income soon, ensure your money is transferred out of the WSIB TAP Fund well in advance. Delays could leave you waiting months for your first check, which may disrupt your financial plans.
Avoiding Common Pitfalls
1. Procrastination
Many employees delay making changes until the last minute, leading to unnecessary delays during retirement. Start the transfer process early to avoid complications.
2. Misunderstanding the Holding Period
The 30-day holding period is unavoidable. Be prepared for this period where your funds will earn minimal or no interest.
3. Lack of Diversification
When transferring to a self-directed account, ensure your investment choices align with your goals. Avoid putting all your money into a single fund.
Frequently Asked Questions
1. Can I keep my money in the WSIB TAP Fund during retirement?
Yes, but accessing funds from the TAP Fund during retirement can take up to 60 days, which may not be ideal if you need prompt income.
2. What happens during the 30-day holding period?
Your funds are moved into a temporary account that typically earns little to no interest. Once the holding period ends, the money is transferred to your self-directed account.
3. Can I transfer directly from the WSIB TAP Fund to an IRA?
No, you must first transfer the money to the self-directed side of Plan 3 before rolling it over to an IRA.
4. How do I decide which investments to choose in a self-directed account?
Consider factors like risk tolerance, retirement timeline, and diversification. Financial advisors or investment tools can help guide your decisions.
5. Is there a penalty for transferring out of the WSIB TAP Fund?
No, there are no penalties for transferring, but the process takes time due to the monthly processing and holding period.
Conclusion
Transferring out of the WSIB TAP Fund can provide greater flexibility, faster access to your money, and more control over your investments. However, the process requires careful planning, especially if you’re nearing retirement. Start early, understand the timeline, and ensure your new investment strategy aligns with your financial goals. By taking these steps, you’ll be better prepared to make the most of your retirement funds.
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