Before you hit your TSP account for income during a period of unemployment, consider this sage advice from singers Carl Perkins and Ringo Starr – Honey Don’t. Image: Vladimir Sukhachev/Shutterstock.com
By: John GrobeDo you think you’ll be leaving federal service during 2025 (voluntarily or involuntarily)? If you can afford to do so, you may want to consider “front-loading” your TSP.
In 2025 you can contribute $23,500 to the TSP, plus a catch-up contribution of $7,500 if you are 50 or over. Those aged 60 – 63 can contribute $11,250 as a catch-up contribution.
When you work an entire year, it is likely that you will spread your TSP contributions out over the entire year. This is especially important if you are a FERS employee, as it ensures you receive the full government matching contributions.
If you are leaving before the end of the year, you can still fully fund the TSP by accelerating your 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 September in 2025, and let’s assume that you will leave at the end of the 18th pay period of the year. Adjust your TSP contributions so that you will reach the maximum contribution by the day you leave.
Calculate what you will need to contribute each pay period in order to reach your goal. Subtract what you have already contributed from the amount you are allowed to contribute and then divide that amount by the number of remaining pay periods left before you leave federal service.
For some of us, this will be an amount we can’t afford. However, do what you can to leave with as much money in the TSP as is possible.
Withdrawals, Loans?
What if you are separated, or accepted a “deferred resignation” offer, or choose to take advantage of any VERAs (Voluntary Early Retirement Authorizations) your agency offers? What if you channel country outlaw singer Johnny Paycheck and tell your boss to “take this job and shove it”?
Before you hit your TSP account for income during a period of unemployment, consider this sage advice from singers Carl Perkins and Ringo Starr – Honey Don’t.
The “King of Rockabillly” wrote and released the song Honey Don’t in 1956 and it was covered by the Beatles (with Ringo singing the lead) in their Beatles 65 album. We should not hit savings we have set aside for retirement for anything other than that retirement unless there is absolutely no other alternative. And if you must, consider a TSP loan rather than a withdrawal.
Consider first:
· Your emergency fund;
· Other taxable accounts;
· Finding non-federal employment;
· Reducing current expenses by tightening up your budget; and
· Taking advantage of flexibilities offered by lenders and credit card companies.
Honey, don’t hit your TSP unless it’s the last resort!
John Grobe, President of Federal Career Experts, is an expert in the area of federal employee retirement and benefits. This expertise comes from his 26 year federal career in which he managed the retirement program in a 3,500-employee office of a large federal agency.
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See also,
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