Habit for a Successful Retirement: Preparing Your TSP For 2018

Habit for a Successful Retirement: Preparing Your TSP For 2018

Many are concerned when it comes to their Thrift Savings Plan (TSP). If you don’t save enough in your TSP throughout your life then you could end up living a very uncomfortable retirement. There is plenty of information out there concerning TSP. Although it’s complicated, and you’re left to filter through all of it to make a plan of action.

Are You Saving the Right Amount in your TSP?

The Thrift Savings Plan (TSP) is very similar to private sector 401k. The TSP is referred to as a fixed contribution plan since its effects are dependent upon the amount you save as well as the performance of your investments. The higher the balance in your account, the higher your retirement money.

Payroll deductions are how contributions are made to the TSP, and you can determine how much you contribute. You can either choose a specific dollar amount, or just use a percentage of your pay. Nevertheless, the IRS places a limit each year on the highest contribution one can make into the TSP.

Catch up Contributions and Regular Contributions are the two types of contributions, and each of them has its own rules.

Regular Contributions

This particular type is available to all eligible employees of all ages. The maximum for yearly Regular Contributions in 2018 is $18,500. You’ll be able to make contributions to Traditional TSP and/or Roth TSP in whatever combination you desire, but the total amount cannot surpass $18,500.

Catch Up Contributions

These are an additional amount beyond the Regular Contributions. You can begin to make Catch Up Contributions at any time starting at age 50. Another requirement for Catch Up Contributions is being on course to attain the year’s maximum Regular Contribution. The maximum Catch Up Contribution for 2018 is $6,000. If qualified, you can contribute to Traditional TSP and/or Roth TSP in whatever combination you desire, but it cannot be more than $6,000.

Automatically your Regular Contribution carries over from year to year until you change it. However, Catch Up Contributions must be re-elected yearly.

Note: No FERS Match is included in the TSP contribution limits. The FERS Match is a separate amount and it doesn’t in anyway affect the limits of the TSP contribution.

Retirement Success Habit

The account balance of a strong TSP begins with good and regular savings habits. There are certain habits that the people who save the most usually follow. At about this time each year, they evaluate the next year’s TSP contribution limits, and they determine the amount they’re saving currently.

To determine the amount you’re saving in TSP this year, you’ll require your present Earnings and Leave Statement, a calculator, and then a pen and paper.

Step 1:  On your LES, put a circle on every TSP/Roth TSP contribution amount recorded each pay period. (Don’t use the year-to-date amount.)

Step 2:  Beginning with Regular Contributions, multiply your TSP Regular Contribution x 26 pay periods.  Carry out this step again for Roth TSP Regular Contributions. Combine the two to obtain your total yearly Regular Contributions.

Step 3:  Then, determine your Catch Up Contribution, if relevant. Multiply your TSP Catch up Contributions x 26 pay seasons. Redo this step for Roth TSP Catch Up Contributions. Join the two collections to get your cumulative yearly Catch Up Contributions. Note: A few years you will have an additional pay date, implying you’ll receive 27 paychecks.  For this study, the regular 26 pay periods are employed.

Always Room for Improvement

Think about ways that you can minimize some daily expenses and improve your TSP savings in 2018!  Small modifications can yield big outcomes. For example, pack a lunch once or twice a week rather than always buying lunch at work. You can also skip the latte and make your own coffee at home. It can help to write down some goals for your 2018 TSP savings, which could then give you the opportunity to find ways to achieve them.

If you take care of your TSP now then it will take care of you in retirement.

Are you going to be ready as you near retirement? Reach out to your financial professional for help if you have any outstanding questions when it comes to your TSP.

 

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