How to Make the Most of Your Thrift Savings Plan
In retirement, there’s nothing that feels quite like receiving a big check every month courtesy of federal retirement benefits. But, if you really want to up the ante while you are still in service, it’s wise to participate in the Thrift Savings Plan. It’s hands down the best vehicle to save and invest for retirement.
Well, did you know that you can become a millionaire thanks to TSP? More importantly, how can you make the most savings through Thrift Savings Plan? Here are 5 proven tips to get you started.
#1. Consider Roth Option
The last thing you want during your retirement is for IRS to hive off a big chunk of your federal retirement benefits. That’s where Roth option comes in handy. You see, traditional TSP contributions grow at a tax-deferred rated. The big catch is that you’ll have to pay taxes when you make withdrawals.
With Roth contribution, on the other hand, you pay taxes at the time of contribution. And, more crucially, you’ll not be taxed when you withdraw your federal retirement benefits. Of course, you’ll likely to retire in a higher tax bracket, making Roth contribution a more sensible option in the long run.
#2. Start Early
When you have just started your fed career, the chances are that you’ll put off making savings thinking better days are coming. Trust me; it really doesn’t get easier. By the time you are in your mid-career, you’ll probably have kids to cater to, elderly parents to care for, and a college fund to build. There’s no magic bullet to it — just start early, and keep going.
#3. Keep an Eye on Your Investment
It’s your nest egg, the biggest portion of your federal retirement benefits. So, don’t neglect your TSP account. As such, it is crucial to check in on how your TSP investments are fairing on. If something is amiss, don’t hesitate to make necessary changes.
#4. Avoid Early Withdrawals
Sure, FRTIB have just made it easy for participants to make TSP withdrawals. However, it’s never a good idea to ransack your nest egg early. Another thing is that TSP loans are permissible. Unless it’s a last resort, please don’t borrow a TSP loan. Think about it: taking out a TSP loan is much akin to borrowing money from future “you.”
#5. When You Turn 59 ½ Reach Out
Ask what you can do that could benefit you more than the G Fund within the TSP. You can do many things once you hit 59 ½ that can help increase your principal without any RISK! Once you are this close to retirement, it’s always better to switch from Risk to Safe.
Congratulations! With these five handy tips, you can take your TSP savings to the next level.
Contact a Federal Retirement Consultant today to learn more.
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