Planning your retirement as a federal employee comes with its own unique considerations. Unfortunately, many resources are focused on private-sector workers who don’t have the benefit of a federal pension, such as your FERS annuity.
By Age 50: Target 4x Your Salary in Your TSP
You’ve likely seen the recommendation that by age 50, you should have saved six times your pre-retirement income. However, for federal workers, this requirement doesn’t quite hold true. Since your pension offers guaranteed income, a more realistic goal is to have around four times your annual salary saved in your Thrift Savings Plan (TSP) by the time you reach 50. If you haven’t hit this target, it’s not too late. You can start catch-up contributions once you turn 50 to make up for any deficit.
Are You Taking Full Advantage of Your TSP Match?
If you’re not contributing enough to get the full agency match in your TSP, you’re missing out on what’s essentially free money. Your agency will match up to 5% of your pay in contributions. The first 3% is matched dollar-for-dollar, and the next 2% is matched at 50%. With the power of compound interest, this 5% match can significantly increase your retirement savings over time.
Boost Your Savings with Catch-Up Contributions After 50
Once you turn 50, or if you will turn 50 during the calendar year, you are eligible to make catch-up contributions in addition to your regular TSP contributions. For 2024, you can contribute an extra $7,500 beyond the standard contribution limit of $23,000. Any contributions you make over the regular limit will automatically roll over into catch-up contributions. And if you’re eligible for the agency match, contributions spilling over will also qualify for the match—up to 5% of your salary.
New Catch-Up Contribution Limits for Ages 60-63 Starting in 2025
Under the Secure Act 2.0, catch-up contribution limits for TSP participants will increase starting in 2025 for individuals turning 60 to 63 years old. You’ll be able to contribute up to $10,000 or 50% more than the regular catch-up limit, whichever is higher. These limits will adjust annually for inflation, helping you set aside even more as you approach retirement.
If you need further assistance, consider speaking with an FRC® trained financial advisor.
