One of the great questions that we get from people over age 50 is whether or not it is too late to really take advantage of investing in the Thrift Savings Plan (TSP). Sometimes they are within 5, 10, or even 15 years from retirement.
The reason that this is such a good question is that often we hear people saying things like, “Gee, I really should have been doing that when I was younger.” They trick themselves into thinking that it is too late to make beneficial changes.
One of the greatest benefits of the TSP is that it is salary deferred. When you elect to participate in the TSP, you get to determine how much of your paycheck you want to put into the Traditional TSP and/or the ROTH TSP. Each pay period, the TSP office deducts your contributions from your paycheck and puts them into the TSP automatically.
Forced savings. Before the money is even deposited into your checking or savings account at your banking institution, your contributions are sent to the TSP office per your instructions. This is powerful for all Federal Employees regardless of where they are at in their careers.
One of the best strategies you can employ to help yourself in retirement is to learn to live off of your net retirement income.
Before you move into fixed income retirement, try developing really great spending habits while you are still working. Take a careful analysis of what your anticipated net retirement income will be. Then, evaluate what you are earning today and see if you can reduce your monthly expenses to that amount.
If you are struggling to make that transition because you keep spending the cash you have in your checking account, increasing your TSP contributions up to the imposed limits might be a good forcing mechanism to get you where you need to be.
Tax planning is an incredibly important aspect of your retirement planning. When you retire are your taxes going to be lower or higher?
Do not assume that your taxes will automatically decrease in retirement. Complete a tax projection of your anticipated retirement income. This shows you what your taxes really will be in retirement. Often, Federal Employees assume because they are no longer working that their taxes will be lower in retirement. However, they forget that most of their retirement income sources are taxable.
Evaluate contributing to the ROTH Component of the TSP. Once you complete your retirement tax plan, it may make sense to pay taxes today and make after-tax contributions to the ROTH component of the TSP.
The TSP is designed as an investment. If you think that you are going to need to use the money you are saving within the next 2 years or so, consider putting it in the “G” Fund. Remember, markets are volatile and they will fluctuate. If you need immediate access to monies in your TSP as part of your retirement plan, you should consider using the “G” Fund.
If you have a longer time frame, make sure that you make investment decisions prudent to your objectives and time horizon.
Happy Planning!
“I have a question related to something in one of your articles about FEHB and Medicare. The article stated: “As a full-time Federal employee, you are eligible to enroll in
“Thank you very much for the great information. Question: Do I need to list my ex-spouse on my FERS retirement application if we were married for less than 10 years
“I watched the very helpful video on ROTH IRA conversions. I will be retiring by the end of 2022 and I do not have any funds in the Roth TSP,
“Is there a way, I can find out how much I will receive at retirement and when I can collect? I worked 24 years, but I don’t know my high
Get the most out of your federal retirement benefits by taking advantage of the FERS resources created by Micah Shilanski, CFP®, and the team of independent financial advisors at Shilanski & Associates, Inc. Join the thousands of federal employees who trust us to guide them in their retirement planning journey because of our unique perspective of how your FERS benefits contribute to your comprehensive financial plan.
Year after year I see Federal Employees missing the same critical concepts in their federal retirement planning. That’s why I’ve created an online workshop to help educate Federal Employees on these critical concepts.
If you are a Financial Advisor looking to work with Federal Employees,
we are always looking for Advisors that want to deliver massive value to clients.
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