Retiring Mid-Year? Consider Front-Loading Your TSP

Do your plans include retirement this year? If so – good for you! Many people choose to retire at the end of the year. December 31, 2023 will be a popular day for FERS employees to retire. Of course, once you are eligible to retire, you can pick any day you choose. I retired on February 28th and my wife retired on November 27th; we were two of many who chose to retire on days other than December 31st.

If you’re one of those who is leaving at the end of the year and have been maxing out your TSP contributions for the last several years, just keep on doing what you’ve been doing, and you’ll have maxed out again by the time you retire. However, if you choose to retire in the middle of the year, you may want to consider “front-loading” your TSP.

In 2023 you can contribute $22,500 to the TSP, plus another $7,500 if you are 50 or over. That’s $30,000 that most retirees can contribute.

If you are retiring in the middle of the year (and if you can afford it), you can accelerate your TSP contributions so that you hit the maximum by the date that you leave. Let’s say you are planning on retiring at the end of June, and let’s assume that you will leave at the end of the 13th pay period of the year. If you contributed $2,308 per pay period, you would reach the full $30,000 at the end of the 13th pay period.

$2,308 per pay period is an amount that is out of the reach of many federal employees nearing retirement. Nonetheless, you can still accelerate your payments (say, by increasing your contributions from 10% to 15% of salary) and end up with a larger amount in your TSP when you leave. It’s never too late to put more money in your Thrift Savings Plan.

Did you know that when you take a loan from your TSP account, the transaction will include a proportional amount from each balance (traditional and Roth)?

 

Citation: FEDweek Published: May 8, 2023