If you’re five to 10 years away from retirement it’s important to conduct a yearly review to make sure your finances are on track. Although there’s no one-size-fits-all federal retirement, the following to-do-list can help give you the big picture of where you stand now and, where you need to be, to achieve your goals.
Review Your TSP Contributions
Each year the IRS sets a maximum contribution limit for your Thrift Savings Plan (TSP) and similar accounts like the 401(k). The 2023 IRS annual limit for regular TSP contributions has been increased to $22,500. That’s $2,000 more than the limit for 2022. This gives you the opportunity to save more for your retirement while enjoying a higher tax deferral.
If you’re age 50 or older, the 2023 Catch Up Contribution limit has been raised to $7,500. When you add this to the higher limit on regular TSP contributions, that’s a total of $30,000 you’ll be able to add to your nest egg. With the 2023 pay raise for federal employees starting in January, you may want to consider using these extra earnings to increase all of your TSP contributions.
“In fact, Option B premiums become so cost prohibitive as you grow older, at some point the death benefit is less than all of the premiums you’ve paid over the years.”
Review Your FEGLI Option B
If you’ve purchased FEGLI Option B to increase the amount of your life insurance benefit, it’s important to understand the drawbacks. Option B premiums begin to increase starting at age 35 and continue to increase every five years. Once you turn age 50, premiums essentially double for every successive five-year age band.
In fact, Option B premiums become so cost prohibitive as you grow older, at some point the death benefit is less than all of the premiums you’ve paid over the years. When it comes to the cost of life insurance after age 50, private insurance may provide a better overall value.
Update Your Beneficiary Designations
Beneficiary designations are extremely important because they supersede a Will, a Trust and even a pre-nuptial agreement. Federal employees usually file their beneficiary designations when they’re first hired. After several years, it’s not unusual to forget who you originally named as beneficiary for the four programs that provide a death benefit:
- Lump sum payments from CSRS or FERS
- Unpaid compensation including any unpaid annual leave
- Thrift Savings Plan
- Federal Employee’s Group Life Insurance
These are just a few of the things you need to do when you’re headed for retirement. Touch base with an FRC® trained advisor who can help you review all the necessary components of a financially-secure retirement plan.
