Suppose you are among those people who are still financially buoyant during this period. In that case, you should increase the amount of money you keep for your retirement. Participants of the Thrift Savings Plan should save as much as possible in their TSP.
Even though some people are still employed, many people are now unemployed. What should be the fate of these categories of unemployed people?
Members of the uniformed services and federal employees are not financially affected by the pandemic, but many of our relations are working on a salary reduction. In contrast, many have lost their jobs because of the pandemic. How do you expect someone who recently experienced a financial crisis to save more for retirement? Or can they even proceed to keep the same amount they saved before the pandemic?
Firstly, every one of us should always put some amount of money aside in case of an emergency. This money should be saved in a separate account that you will not use for other expenses. Many financial experts’ most common suggestion is that your emergency fund should cater to your expenses for at least three to twelve months. Federal employees may not have the emergency fund that will keep them for three months because they regularly paid their furloughs.
Since COVID-19 has caused the economy to melt down, the impact may not be felt by federal employees. Still, their relatives who are not working with the government are affected by the pandemic. Your spouse may have been out of work for the last three months, and we are still counting. I will advise that you save at least six months worth of your expenses in the emergency fund.
In addition to your TSP, if you benefit from an employer-matching contribution and want to start saving for an emergency, you should put 5% of the contribution into the TSP before contributing to your emergency fund. This is because you will not want to leave out the free money you will receive from the matching contribution. You should put your emergency fund in a safe place, where you can access it easily.
Ensure that you set some money aside for an emergency because it will prevent you from spending your TSP funds during the emergency period. When there is no emergency, you can still use the money for retirement and other expenses. The recent crisis caused an increase in the number of withdrawals from the TSP. A recent study shows that emergency fund participants make fewer withdrawals from their retirement plan than those without emergency funds.
You should note that savings, in general, occur gradually. If you start your savings now, you will achieve your financial goals over time. Right now, you may say that you are not financially capable of saving for an emergency. Still, you should check your budget and cut out some expenses that will give you some money to save for an emergency. The projection is that we will not witness another economic meltdown soon, but forecasts have failed in the past. It is now time that you set aside some money for an emergency.