If your FERS retirement date is 10 years away, you may feel like you have plenty of time to put together a financial plan. But nothing could be further from the truth. This is the time to save as much as possible while taking steps to pay down as much debt as possible.
Max Out Your Thrift Savings Plan (TSP) Contributions
Make sure you’re contributing enough to your TSP to qualify for your 5% agency match. The 2024 limit for the TSP and similar retirement accounts has been increased to $23,000 while the Catch-Up Contribution limit is $7,500 for federal employees age 50 and older. You can make TSP Catch-Up Contributions in addition to your regular contributions if you’re age 50 or older, or turning 50 during the calendar year – even if you turn 50 on December 31st, 2024.
Pay Down As Much Consumer Debt As Possible
Carrying consumer debt into retirement is one of the biggest drains on your nest egg when you’re no longer working. Consider this: interest rates on credit cards outpace the historic market return on the TSP and other investments you may have. Develop a budget to cut back expenses and use the money you save to pay down debt. If you can make extra payments to help pay down your mortgage over the next 10 years, even better.
“If you tap into your traditional Thrift Savings Plan (TSP) to cover an emergency you’ll owe income taxes on 100% of the amount withdrawn.”
Start Building An Emergency Fund
From costly home repairs like a new roof to health and dental care that your insurance doesn’t cover, or a family member in crisis who needs your financial help, an emergency fund provides a liquid-cash resource when life happens. If you tap into your traditional Thrift Savings Plan (TSP) to cover an emergency you’ll owe income taxes on 100% of the amount withdrawn. And if you use a high-interest credit card, your monthly expenses may start to exceed your income putting your financial security at risk.
Start Shopping For Long-Term Care (LTC) Insurance
Research indicates someone turning 65 today has a nearly 70% chance of needing some degree of non-medical, custodial care services in the future. Without LTC insurance, the expense of LTC in a facility or at home will be entirely out of pocket. The younger you are when you purchase LTC insurance, the better the deal. If you wait too long to get coverage you may be turned down.
To learn more about getting your retirement plan on track, work with an FRC® trained advisor who understands your complex federal benefits.
