Retiring during 2012? You may want to consider “front-loading” your TSP. In 2012 you can contribute $17,000 to the TSP, plus another $5,500 if you are 50 or over. When you work an entire year, it is likely that you will spread your TSP contributions out over the entire year. This is especially important if you are a FERS employee, as it ensures you receive the full government matching contributions.
If you are retiring in the middle of the year, you can accelerate your TSP contributions so that you hit the maximum by the date that you leave. Let’s say you are planning on retiring at the end of June in 2012, and let’s assume that you will leave at the end of the 13th pay period of the year. If you contributed $1,308 per pay period, you would reach the full $17,000 at the end of the 13th pay period. For the “catch-up” contributions of $5,500 per year, you would contribute $424 per pay period to max out at the end of the 13th pay period.
Of course, $1732 per pay period is out of the reach of most federal employees nearing retirement. Nonetheless, you could accelerate your payments (say, by increasing your contributions from 10% to 15% of salary) and end up with a larger amount in your TSP when you leave.
John Grobe’s latest book, The Answer Book on Your Federal Employee Benefits, has just been released by LRP Publications. The book is written in an easy to understand question and answer format and covers all areas of federal benefits from the perspective of an employee at various stages of their career. Order your copy at shoplrp.com.