Currently, there are 94,873 Thrift Savings Plan (TSP) millionaires. If you’re one of them, there’s no need to read further. However, if you’re age 50 and you don’t have at least 4X your annual income stocked away in your TSP, you’re definitely a late bloomer.
How Much Will You Need To Retire?
To answer this question, use the Federal Ballpark E$timate® calculator on the OPM website and create your online “my Social Security account”. Both resources can give you an estimate of your monthly retirement benefits. Next, look at your current expenses because there’s a good chance you’ll spend a similar amount in retirement.
Let’s say your monthly expenses average $7,000 per month but the total amount of your FERS pension plus your Social Security, is only $6,000 per month. To cover the shortfall, you’ll need to take monthly distributions from your TSP in excess of $1,000 because you’ll owe taxes on the withdrawal.
If the numbers show you won’t have enough saved in your TSP to cover the income gap for the next 30 years, it’s crunch time.
“Late bloomers need to tackle debt during their working years to protect their TSP nest egg.”
5 Retirement Savings Strategies For Late Bloomers
1. Take advantage of higher 2024 TSP Contribution Limits: The 2024 contribution limit for the TSP has been increased to $23,000 while the Catch-Up Contribution limit is $7,500 for federal employees age 50 and older.
2. Work till age 62 for the FERS 10% bonus: If you retire at 62 with 20 or more years of service, your High-3 is multiplied by 1.1% instead of the 1% formula. Though the difference may not seem that much, it’s a 10% increase in your monthly pension. Working longer also means additional years contributing to your TSP plus your 5% agency match.
3. Delay filing for Social Security: Social Security adds an 8% credit for each year you delay your benefit until age 70. Add to this, your benefit is indexed for a cost of living adjustment (COLA) for each year you wait.
4. Start paying down consumer debt. According to a recent report, 71% of retirees have debt that’s not related to their mortgage. This includes high-interest credit cards, car loans, and even student loans. Late bloomers need to tackle debt during their working years to protect their TSP nest egg.
5. Work with an FRC® trained advisor. Saving more for retirement shouldn’t be a do-it-yourself project. An FRC® trained advisor fully understands your federal benefits. Together, you can develop a strategy that makes up for lost time and provides financial security in retirement.
Sources:
https://www.govexec.com/pay-benefits/2023/12/tsp–compound-interest/392553/
https://money.usnews.com/money/retirement/articles/reasons-retirees-carry-debt
