It’s not too late to make some New Year’s resolutions about your Thrift Savings Plan! And, unlike many New Year’s resolutions that require constant vigilance, you may only have to take one step to improve your financial situation in 2017 and further into the future.
Your typical New Year’s resolution (let’s say losing 25 pounds by summer so that you can fit into that nice bathing suit you bought on sale) requires you to religiously watch what you eat and to engage in exercise in order to drop those pounds and firm up. Let’s look at some TSP resolutions that require less effort, yet promise a great reward.
First, you can increase your contribution level (assuming that you are not already at the maximum amount of $18,000 a year). If you increase your contribution rate, it will take effect next pay period and will continue until you change it again. You take just one step and you will continue to benefit from it. You “set it and forget it”. If you put more money in, you will get more money out in the future.
Second, if you are FERS, you can ensure that you are contributing at least 5% of your salary to the TSP. Believe it or not, 10% of FERS employees do not participate in the plan, and many do not contribute the 5% that is necessary to receive the full government match. I like to use the phrase “strive for five” in the retirement and TSP classes that I provide for federal employees.
Third, if you’re turning 50 this year, be sure to take advantage of the opportunity to make “catch-up” contributions. Assuming that you can afford it, you are allowed to contribute an extra $6,000 per year to your TSP.
Fourth, revisit your contribution and account allocations. If you’re still 100% in the C fund and are close to retirement, ask yourself in the level of risk you are taking is appropriate for you. You may want to talk to a financial planner who is familiar with the TSP. Or, consider one to the TSP’s lifecycle (L) funds. Or, utilize an allocation service like TSPSafetyNet (https://gv185.isrefer.com/go/free-trial/jg814/ click on this link for a free trial subscription) or the TSP Strategist (enter code 1030 in the “other” box in the “how did you hear about us” area for an extra month on your paid subscription).
Fifth, be aware that the fact that you fully fund your TSP account has no impact on your ability to contribute to an IRA. If you are a high-income individual, you may not be able to deduct your contributions to a Traditional IRA, or even contribute to a Roth IRA, but you can always make non-deductible contributions to a Traditional IRA.
Sixth, realize that you – and only you – can make a difference in your retirement income through your TSP. While your pension (either FERS or CSRS) and Social Security are mandatory, the TSP is completely voluntary.
Jump into 2017 with the desire to improve your retirement financial situation!