One of the challenges when planning your federal retirement is finding information that applies to you. The problem is – most of the retirement information out there is geared for people retiring from the private sector who don’t have a pension like your FERS annuity.
By Age 50, You Should Have About 4X Your Salary In Your TSP
You may have read the recommendation that you should have at least six times your pre-retirement income saved by age 50. Does this also apply to federal workers? Not really. Since federal employees have a guaranteed pension, the amount they should have socked away in their TSP by age 50 is about four times their annual salary. If you haven’t hit this benchmark there’s no need to worry. You can start making catch-up contributions at age 50.
Are You Getting Your TSP Agency Match?
If you’re not contributing enough to get your agency match, you’re walking away from free money. Your agency will match up to the first 5% of your pay that you contribute each pay period. The first 3% will be matched dollar-for-dollar. The next 2% of your employee contribution will be matched at 50 cents on the dollar. When you add in the magic of compound interest, you can see why the 5% agency match is considered free money.
“Once you reach the TSP contribution limit for the year, your additional contributions will automatically “spill over” and count as a catch-up contribution.”
TSP Catch-Up Contributions At Age 50
If you’re aged 50 or older, or turning 50 during the current calendar year (even if you turn 50 on December 31), you can make TSP catch-up contributions in addition to your regular contributions. The 2024 IRS annual limit for TSP catch-up contributions is $7,500. This amount is in addition to the regular TSP limit of $23,000.
Once you reach the TSP contribution limit for the year, your additional contributions will automatically “spill over” and count as a catch-up contribution. And, if you qualify for your agency match, contributions spilling over toward the catch-up limit will qualify for the match on up to 5% of your salary.
As of January 1, 2025, Higher Catch-Up Contributions For Ages 60-63
One of the changes under the Secure Act 2.0 was raising the catch-up contribution limits for TSP participants. Effective January 1, 2025, the limit for active participants turning ages 60, 61, 62, or 63 in the calendar year to either $10,000 or 50% more than the regular catch-up contribution limit, whichever is greater. The increased amounts will be indexed for inflation after 2025 to help you save even more for retirement.
To learn more, connect with an FRC® trained advisor.
