With the possibility of buyouts and agency downsizing on the horizon, many federal employees on the edge of retirement or considering a change are wondering what to do. If that’s you, consider front-loading your TSP if you are going to be leaving before the end of the year (due to a VERA or RIF).
In 2017 you can contribute $18,000 to the TSP, plus another $6,000 if you are 50 or over. 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 leave at the end of the 20th pay period of the year at which time you would have contributed $13,860 based on your current allocation of $693 per pay period (the amount it takes to “max out” by the 26th pay period).
We’ll assume that you reach the decision to leave federal employment two months prior to your actual leaving date, leaving you four pay periods until your departure. If you were able to increase your bi-weekly contribution to $1,035, you would reach $18,000 in the 20th pay period. For the “catch-up” contributions of $6,000 per year, you would contribute $576 per pay period to max out at the end of the 20th pay period.
This adds up to a total of $1,611 per pay period, an amount that is out of the reach of many federal employees considering leaving the government. Nonetheless, you could 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 – but whatever you do, it pays in the long run to resist the urge to spend that TSP money and keep it for your retirement. In other words – don’t spend it! If you leave, either leave it in the TSP (yes, you can do this) or roll it over into an IRA or the defined contribution plan of your next employer.