Getting a raise–whether a wide-scale one as is coming up or on an individual basis, such as on a promotion or advancing up the pay ladder–provides a good reason to reassess TSP investments. Employees may invest in the TSP by percentage of salary or by dollar amount per pay period. Regular investments continue unless changed year-to-year, meaning that employees making investments based on a percentage of salary will see their investment rates go up automatically when the raise takes effect, in most cases starting January 8. Those making investments based on a dollar amount per pay period might wish to consider increasing that amount. Employees under FERS further should note that to capture the maximum government contributions, they need to pace their investments so that they are able to invest at least 5 percent of salary each pay period throughout the year. If they hit the annual limit (remaining $18,000 in 2017) before that, their regular investments will shut off, and so will agency matching contributions (although the automatic 1 percent of salary contribution would continue). Once lost, matching contributions can’t be recouped. Employees investing on a percentage of salary basis might cross that threshold too soon in 2017, due to the impact of a raise. FERS employees also will want to check the number of pay distribution dates–not the ending dates of biweekly pay periods–for them in 2017 to best structure their investments. Typically it is 26, but there are situations where it can be one more or one fewer. (The actual investment in the TSP often is made later than the individual’s pay distribution date but that is not an issue for these purposes.) There is no such consideration for CSRS employees, who get no government contributions. In theory, at least, they could invest all of their salary, after certain mandatory withholdings, in the TSP until they reach their limit, in order to get the money into their accounts early and start the tax-deferred growth as soon as possible.
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