Recent reports show that 2023 stock gains have helped to grow the average federal worker’s Thrift Savings Plan (TSP) account to $175,000. Though this is good news, the challenge for pre-retirees is making sure you’ve saved enough to maintain your lifestyle when you separate from service. Here are a few strategies to consider.
Max Out Your TSP & Make Catch-Up Contributions
Of course, the most basic way to save more is to increase the money you put aside for a rainy day. This means maxing out TSP contributions and taking advantage of catch-up contributions at age 50. For 2024, contribution limits for the TSP is $23,000 while the catch-up contribution limit is $7,500. This means federal employees age 50 and older can contribute a total of $30,500 this year. If you’re unable to stretch your paychecks to increase your TSP contributions you may have to consider working longer than your Minimum Retirement Age (MRA).
Work Until Age 62 & Qualify For The FERS 10% Bonus
Under FERS, you can retire with an immediate annuity if you meet the years of service requirement at your Minimum Retirement Age (MRA). Your MRA can range for 55 to 57 depending on the year you were born. However, if you’ve fallen behind on saving for retirement, working until age 62 can make you eligible for the FERS 10% Bonus if you have at least 20 years of creditable service. In addition to increasing your monthly annuity (pension) by 10%, the extra years give you more time to grow your TSP.
“For couples who file taxes jointly, up to $500,000 of proceeds from a home sale are tax free.”
Sell Your Home & Invest The Profit In Your Retirement
Though surveys show a majority of Americans approaching retirement want to “age in place,” this may not be a good strategy if you’re paying a sizeable mortgage payment that prevents you from contributing more to your TSP. Since housing is usually the top living expense for retirees, downsizing before you retire is something to consider. In addition to a lower mortgage payment, you can use the proceeds of a home sale to:
- Pay down high-interest credit card debt before you retire – consumer debt is one of the biggest threats to retirement.
- Open an emergency savings account so you don’t have to tap your TSP if life throws you a financial curveball in retirement.
- Or buy a Lifetime Annuity to supplement your retirement income.
For couples who file taxes jointly, up to $500,000 of proceeds from a home sale are tax free. For complete information, download the IRS publication, “Selling Your Home.”
It’s never too late to save more when you make the effort. Connect with an FRC® trained advisor to learn how.
