Many articles have been written about choosing the “best” day to retire when it comes to your FERS or CSRS annuities. Although you can retire any day you want to once you become eligible, some days turn out to be more advantageous than others. Often the last day of a month is the most beneficial for FERS, while a day between the last day of a month and the 3rd of the next month work best for CSRS. If your goal is to maximize the value of your lump-sum annual leave payout, the end of the year is generally best.
When it comes to the Thrift Savings Plan, are there any days that are better than others? Not as much as there are with CSRS and FERS, but there are some items that you should consider when you are choosing the day you retire.
First, if you are retiring at or near the end of the calendar year, you should be sure to max out your TSP contributions for the year. The means that you should, at the beginning of the year in which you plan to retire, divide the elective deferral amount ($20,500 in 2022) by the number of pay days you will have (generally 26, though occasionally 27). If you were retiring at the end of 2022, you would contribute $789 per pay period in a 26 pay day year; this would have you reaching the elective deferral amount in your final pay period. You would also receive the full employer matching contribution, as you had contributed over 5% of your salary in each pay period.
Second, if you are retiring before the end of the calendar year, you should try to max out your contributions for the year. You would use the same strategy outlined in the above paragraph; that is, divide the elective deferral amount by the number of pay periods that you will work over the course of the year. If you were retiring at the end of October, you would work 19 pay periods. $1,079 per pay period would bring you up to the elective deferral amount by the day you retire.
Keep in mind that employees 50 and over (this includes the year in which they attain the age of 50) can contribute an extra $6,500 per year to the TSP. This would make the total that you can contribute $27,000. So, rather than contributing the $789 that would max out your regular contributions, you would contribute $1,038 per pay period.
Both of these strategies assume that you can afford to contribute that much money to the TSP. While some federal employees are fortunate enough to be highly compensated, giving them the ability to max out their TSP contributions, not all of us can do so. If you are among those who cannot max out, you should still try to get in as much as you can afford.
When it comes to retirement savings, more is always better than less. If you’ve still got some time to go before you retire, don’t wait – start contributing more to the TSP now.
Calculator: See your time to retire under FERS ticking away