Many federal employees wonder if retiring at the end of the month will affect their Thrift Savings Plan (TSP) contributions. This is a crucial question to consider when planning your retirement, especially if you are hoping to make the most out of your TSP savings before you leave the workforce. For those who have been contributing consistently throughout their career, every last contribution counts towards building a comfortable retirement nest egg. However, the timing of your retirement, specifically the date you choose to retire, can have an impact on whether you receive your final paycheck, and, by extension, your final TSP contribution. Understanding how your TSP contributions work and the timing involved is essential for making sure you don’t miss out on any potential savings.
Key Points
- If you retire at the end of the month, you might not get a full paycheck for that pay period.
- TSP contributions are taken from your paycheck, not from your retirement income.
- If you miss your last paycheck, you could also miss your last TSP contribution, unless you have already reached the yearly contribution limit.
- Planning ahead can help you reach your TSP goals in your final year of work.
How TSP Contributions Work
TSP contributions are deducted directly from your paycheck while you are a federal employee. Once you retire, you cannot make new contributions from earned income to your TSP account. Your last paycheck is your final chance to contribute, unless you have already reached the annual limit for the year.
Timing Your Retirement and Pay Periods
Federal employees are usually paid every two weeks. If you retire at the very end of the month—such as on a weekend or the 31st—you might not get a paycheck for the full pay period. If you do not get a paycheck, you will not have a TSP contribution for that period.
For example, if you retire on March 31 but the pay period ends on April 6, you may only be paid for a few days, or not at all, depending on your agency’s payroll rules. This could mean missing your last TSP contribution if you have not already reached the yearly limit.
Why the End of the Month Matters
Retiring at the end of the month is helpful for starting your FERS pension right away because your pension begins the next day. However, for TSP, your contributions depend on your pay schedule, not the calendar month. If you planned to reach the TSP limit by spreading your contributions throughout the year, missing your last paycheck could mean you do not reach your goal.
What You Can Do
To make sure you reach your TSP contribution goals before you retire:
- Increase your TSP contribution percentage earlier in the year.
- Calculate how much you need to contribute each pay period to reach the annual limit.
- Talk with your HR or payroll office to find out when your final paycheck will be issued.
The IRS sets the annual TSP contribution limit. For 2025, the limit is $23,000 for regular contributions, plus an extra $7,500 for those age 50 or older.
Conclusion
Retiring at the end of the month is good for starting your pension right away, but it can affect your TSP if you do not receive a full paycheck in your final pay period. Since TSP contributions are based on actual earnings, missing your last paycheck could mean you miss your last TSP contribution. Plan ahead by adjusting your contributions earlier in the year so your retirement date does not interfere with your TSP savings goals.
ABOUT THE AUTHOR
Micah Shilanski, CFP®, is a distinguished financial planner known for his deep commitment to providing exceptional advisory services to his clients. As the founder of Plan Your Federal Retirement, Micah has dedicated his career to helping federal employees understand and optimize their benefits to ensure a secure and prosperous retirement. His expertise is widely recognized in the industry, making him a sought-after speaker and educator on financial planning and retirement strategies.
Micah’s approach is client-centered, focusing on creating personalized strategies that address each individual’s unique needs. His work emphasizes the importance of comprehensive planning, incorporating aspects of tax strategy, investment management, and risk assessment to guide clients toward achieving their financial goals.Micah Shilanski 00:00
A great benefit you have is your TSP that Thrift Savings Plan, and if you ever wondered about when you retire, do you still get your match on your TSP? Well, then stay tuned for this FERS Federal Fact Check. Hi, I’m Micah Shilanski with Plan Your Federal Retirement, and we have a really good question coming in from Ken, about the TSP and a matching contribution, and Ken says, I have a question about the TSP matching contributions, if I retire at the end of the month, which happens to be in the middle of a pay period, do I still get the TSP matching contributions? Ken, that is a great question. Short answer, yes, you absolutely do, right? If you put money in into the TSP account, you are eligible for up to a 5% match, right? They’ll match 100% of your contributions, up to 5% and then if you put that money in, if you only work half a pay period, or portion of a pay period, you get proportionate to whatever you contributed in that so you don’t get any extra money, right, but you’re going to get that full match up to your contribution of that 5% now, a couple things that I still see to look out to. Sometimes people, when they get close to retirement, they’re like, hey, I might retire in June, so I’m going to max fund the TSP for the first six months of the year, but, you know, I may retire in June, I may wait later in the year. Well, the problem with that you only get your TSP match if you’re putting money into the TSP. What does that mean? Well, let’s say and see you maxed funded your TSP from January to June, and then from July to December, you didn’t put any money in, that means you only got a 5% match on that first 6 months, you lost half of your match, right? They’re not putting in at dollars, they get a you get 100% match up to 5% and so if you hit that and you max fund the TSP in that first 6 months, and you’re not putting money in for the other 6 months, you do not get the match on that other half of the money, so be very careful. My clients that want to retire mid year but aren’t sure, we just back into the math a little bit for them and say, hey, here’s how much you could contribute, and then guess what, here’s how much you can contribute if you keep working the rest of the year in order to still get that 5% match. So don’t leave that money on the table, that’s not extra money, that is your money, and you should make sure that you’re getting that benefit, but if you do retire mid month, you’re going to get proportionately what you had earned on that match, which is absolutely fantastic. The TSP is a great benefit that you guys have, but really make sure you understand, especially distributions in retirement, so often federal employees go into retirement and thinking the TSP is going to work the same thing as it worked while they were working, and that’s just not the case, so making sure you’re jumping on our website, planyourfederalretirement.com. Learn more about the TSP and how it works in retirement, till next time Happy Planning!