Earn the maximum amount of money from TSP matching contributions

Thrift Savings Plan TSP

Are you one of those FERS employees that are compensated more than most? And do you also contribute the maximum amount of money to your TSP account every year? There is some good news for you. You can stop losing matching contributions of the government by maxing your TSP out before the year ends.

 

Earn money from TSP matching contributions:

The government is liable to contribute around 5 percent of your pay check to the TSP after every pay period. Here’s how:

  1. There is a 1 percent automatic contribution that’s paid even if you are not contributing to your TSP.
  2. A dollar-for-dollar match applicable on 3 percent of your income that you add after every pay cycle.
  3. The next 2 percent of your income that you add each pay period will also have a fifty-cent on a dollar match.

So, if you contribute a certain amount of money that’s substantial then you are bound to lose some serious amounts of money to government contributions. Here’s how you can prevent this from happening:

First what you need to do is divide your salary by the number of pay dates and not the pay periods in a year. Normally there are around 26 pay dates. There are some cases when there are 27 days as well but let’s just stick to a 26 day one for this example. If you earn 110 thousand dollars in a year, then you will have to part with 693 dollars after every pay period. This will ensure that you receive around 5 percent government contribution for each of your pay period.

 

This strategy is of course not applicable to those who don’t earn a lot of money but for those who get compensated a substantial amount, this is certainly something to know about.

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