As you hit the half-century mark, retirement planning starts to take center stage. Here are five pivotal milestones to guide your retirement journey:
1. Age 50: TSP Catch-Up Contributions
Upon reaching 50, you become eligible for TSP Catch-Up Contributions, regardless of whether your birthday falls on December 31st. The 2024 IRS annual limit for these contributions stands at $7,500, in addition to the standard limit of $23,000. Remember, Catch-Up Contributions can only be made from your basic pay.
2. Age 59-½: Penalty-Free In-Service TSP Withdrawals
Once you hit 59-½, you can make up to four age-based, in-service TSP withdrawals annually without facing penalties, provided you’re still employed. However, withdrawals are limited to vested funds, and income taxes apply to the taxable portion. Consider utilizing this option to tackle high-interest consumer debt before retirement.
3. Age 62: Eligibility for the FERS 10% Bonus
Retiring at 62 or later, with a minimum of 20 years of creditable service, entitles you to a FERS annuity calculated using the 1.1% formula instead of 1%. While seemingly modest, this adjustment translates to a lifelong 10% increase. Additionally, at 62, you become eligible for Cost Of Living Adjustments (COLAs), enhancing your retirement income.
4. Age 65: Medicare Eligibility
At 65, Medicare Part A is accessible to federal workers who contributed to the system, typically at no cost. Combining Part A with FEHB coverage is recommended by OPM. The decision regarding enrollment in Medicare Part B is nuanced, with FEHB participants in HMO plans often finding comprehensive coverage without Part B necessary.
5. Age 73: Required Minimum Distributions (RMDs)
Commencing January 1, 2023, the RMD age was raised to 73 for individuals born after December 31, 1950. Notably, Roth TSP balances are exempt from RMDs as of January 1, 2024, with only traditional TSP balances factoring into RMD calculations.
