TSP

John Grobe

Are you thinking of making New Year’s resolutions for 2022? Don’t forget financial resolutions, including some that will impact your Thrift Savings Plan and your future retirement security. Unlike many New Year’s resolutions that require constant vigilance, you may only have to take one little step to improve your financial situation in 2022 and the future. It’s a good thing to make a resolution that takes only one step; a recent survey by Scranton University reports that 81% of people abandon their New Year’s resolutions before January ends. If you’ve already acted on your resolution before the end of January, you will have succeeded.

Your typical New Year’s resolution requires you to eat better, drink less, exercise more (naturally that follows a stretch of holiday celebration). Yet, there are some TSP related resolutions that require far less effort than weight loss but promise a great reward.

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You can increase your contribution level (assuming that you are not already at the maximum amount of $20,500 a year, $27,000 a year if you are age 50 or older or will turn 50 in 2022). If you increase your contribution rate, it will take effect the next pay period and will continue until you change it again. You take just one step and you will continue to benefit from it. All you need to do is to set it and forget it. It stands to reason that, the more money you put in, the more you will be able to take out in the future.

If you are FERS, you can ensure that you are contributing at least 5% of your salary to the TSP. Hard as it is to believe, 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.

Revisit your contribution and account allocations. If you’re still 100% in the three stock funds (C, S and I) and are close to retirement, ask yourself if 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 you might want to consider one to the TSP’s lifecycle (L) funds.

Be aware that the fact that you are fully funding your TSP account has no impact on your ability to contribute to an Individual Retirement Arrangement (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. In 2022, you can contribute $6,000 to an IRA plus an additional $1,000 if you are 50 or older (including the year you turn 50).

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. It’s up to you.

Now we’ll explore other financial resolutions that you can make.

You can pay down debt, especially high-interest debt like that associated with credit cards. With today’s low mortgage rates, you might also want to look into refinancing your mortgage.

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Take a look at your insurance. Is your home insurance adequate based on your house’s increased value? Have you made any improvements that further increase its value? Are you in a flood zone? If so, make sure that you have flood insurance. Has your car depreciated enough that it no longer makes sense to have collision coverage?

Do you have an estate plan? How long has it been since you updated it? Review your will, trust, powers of attorney and beneficiary forms to ensure that they reflect your current wishes.

Jump into 2022 with resolutions that will improve your financial situation!

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Designating Beneficiaries for Survivor, TSP Benefits

Considerations for Carrying FEHB into Retirement

The Pros and (Mostly) Cons of Taking a Refund of Your Retirement Contributions

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FERS Retirement Guide 2022