Here’s What you should Know About The Thrift Savings Plan
Most people don’t know the main differences between the IRA, 401(k), and the Thrift Savings Plan. Some financial experts regard the TSP as the best plan for federal retirees.
Therefore, you need to know the TSP-eligible participants, its yearly contribution limit, the operating mechanism, and why the TSP is the best plan. Knowing the TSP rules related to tax and withdrawals is also essential.
TSP and Its Eligible Participants
The Thrift Savings Plan is similar to the 401(k) plan, and public sector workers use both plans. The TSP offers government employees a tax-advantaged plan.
The TSP has above 6 million participants as of 2020, with an asset value of $735 billion under its management.
The TSP has similar rules to the 401(k) plan regarding the contribution amount and government requirements relating to tax and withdrawals. The TSP has a smaller fee of about 0.05% compared to the 401(k) plan. Your entire TSP fund will work for you because of its small management costs. This is why you should put a large amount of your income into the TSP.
You are eligible to participate in the Thrift Savings Plan if you are a uniformed service member (ready reserve or active duty) or a civilian in defined service categories. You are also eligible to participate in the TSP if you are an employee under the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS).
How the Thrift Savings Plan works
Once you are eligible to participate in the TSP, your employer will likely inform you about TSP participation during the job orientation.
Suppose you want to contribute to your workplace Thrift Savings Plan. You have to decide the income percentage you will be contributing and the specific TSP (Roth or Traditional TSP) you will use for your TSP contribution. You will also determine how you want to invest your funds into the TSP, and you can select the best option that will benefit you in the long run.
You need to understand these two essential things before saving in the TSP:
• Most companies give a match: If you are saving money in this company’s TSP, your retirement account will contain your individual funds and the company funds. The highest match is 5% of your monthly salary.
• TSP offers many tax advantages: You can withdraw your money during retirement without paying taxes, lower your taxable earnings, and pay your taxes upfront with the Thrift Savings Plan. The TSP allows your investment to grow without taxes.
Thrift Savings Plan Contribution Limits in 2022
The TSP contribution limit is similar to that of 401(k). If you are below 50 years by the 2022 end, your maximum TSP contribution in 2022 will be $20,500. This will be your maximum TSP contribution limit even if you divide your TSP contributions between the Roth and Traditional TSP plans.
Those aged 50 years and above have an extra $6,500 as a catch-up contribution. You can access this contribution limit if your employer allows you to make after-tax TSP contributions.
According to the IRS, you can save new money about $61,000 in your TSP this year. For those above 50 years, the maximum amount they can contribute in new money is $67,500.
Although the Thrift Savings Plan receives less attention than the 401(k) plan, if you can access your workplace TSP, you have a higher chance of making tax-advantaged and well-planned retirement savings.
Contact Information:
Email: [email protected]
Phone: 3234811328
Bio:
For over 13 years, Jason Anderson has served as a Personal Financial Advisor, Estate and Retirement Planner, helping to educate individuals from all walks of life and income levels on wise money investment and planning for a comfortable lifestyle and retirement.
Over time, Jason Anderson has become the ‘Go-To’ leading authority on personal financial advising, financial planning, and analysis, as well as retirement planning and financial planning for SMALL BUSINESS OWNERS. He also provides HIGHLY Popular financial education seminars for groups. These financial seminars empower people to more effectively budget, plan, manage their money, and achieve their personal financial goals. As a result of the excellent results, praise, and feedback that their financial seminars have received, the City of Los Angeles, The AFL-CIO union groups, as well as several other organizations, have decided to partner with Jason to more effectively accomplish their mission. He was also honored to be showcased in the November 2014 issue of Forbes Magazine “Americas Financial Leaders” and has been dubbed by the media as ‘The Financial Educator.’
Jason is passionate about the work he does because it brings him joy to help his financial planning and advising clients reach their financial goals. He finds excitement in assisting families in saving and paying for their children’s college education without stress, thanks to the financial plans he designs for them. He also takes pride in witnessing clients reach retirement and enjoy it precisely the way they desire.
Personally, Jason finds joy in being a husband and father of two wonderful children. In his spare time, he enjoys traveling, sports, hiking, and reading.
He works with Employees, Business Professionals, Business Owners, and ‘High Net Worth’ People.
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Disclosure:
All annuity and life insurance products are designed to supplement securities as part of an overall plan. The recommendation of annuities and life insurance is not designed to eliminate the need for securities in any way.
