Despite having received thousands of e-mails from federal employees about personnel issues during the past two decades, not a single e-mail has been a complaint about having too much money after retirement.
But, not surprisingly, large numbers of readers are worried about having enough money to live comfortably after retirement. And they should be worried. A number of people underestimate how much money they will need when they retire because, while some expenses may go down, there is more time available for travel, eating out or buying expensive new toys to use with all the free time available now that the time clock on the wall is no longer tracking when you leave work.
One goal of any future retiree should be to accumulate as much money as possible prior to retirement. The obvious catch is that most people also want all their money to spend right now. If you give in to this all-too-human urge, you may find yourself working much longer than you may have envisioned a couple of decades ago when you first started thinking about retirement as a possibility.
With that in mind, readers will want to strongly consider any opportunity to increase their retirement assets before walking out of the office parking lot one last time. For those seriously considering retirement, you may want to tighten your belt, make a new year’s resolution, and plan to sacrifice some of your current spending money now to be able to retire earlier rather than later.
If you are eligible, here is one opportunity you should seize: "Catch-up" contributions to your Thrift Savings Plan.
Like most programs that have some benefit, not everyone is eligible.
First, a catch-up contribution is separate from your regular TSP contribution. You must certify that you have made (or will make) the maximum contribution to your TSP account in 2006. That means you have to put $15,000 into your "regular" TSP during the year. There is an exception to this. If you have another job with another retirement plan, you can count the contributions you may have made to that plan. In either case, you have to put out the $15,000 toward your retirement.
Second, to make a catch-up contribution, you have to be at least 50 years old in the year in which the catch-up contribution is made. In other words, you have to be at least 50 years old sometime in 2006 if you are going to use this program.
Third, you are limited to contributing $5000 as a catch-up contribution in 2006.
When filling out the payroll deduction form to enroll for a catch-up contribution, be sure you do not exceed your total net pay. If you do, you are likely to find that your payroll office will not honor the request.
For those who may be inclined to just skip this opportunity, here is an extra incentive to put it into perspective. That extra $5000 could be worth even more to you when you retire. If you retire at age 62, that $5000 will keep on working during the years you are still commuting to the office.
Here is an example. If you put your money into the TSP stock funds (the I Fund, the C Fund or the S Fund), and if you assume an average annual return of 7%, by the time you are 62, that $5000 that you give up now will be worth approximately $11,260.
And here is even better news. If you are turning 50 in 2006, and if you put that $5000 in each year until you are 62, you will have an extra $100,000 when you retire (assuming an average annual return of 7%). When you consider any extra money put in by Uncle Sam to help you out, you will have even more money to count when you are enjoying your retirement time.
For those readers who don’t have this much money, or their expenses are already equal to or exceeding their income, or can’t control the urge to open their wallets when entering the mall, the TSP catch-up provisions don’t apply. You can keep on working and keep on contributing to your retirement system until late in life or until you die on the job.
It’s your choice.