Once You’ve Maxed Out the TSP, Do This!

Once federal employees have maxed out their TSP accounts, they can begin saving in other areas to help fully realize their financial goals.

Maxing out your TSP just feels good.

There is just something about it that putting that much away for retirement that brings a smile to my face.

Note: In 2022, the max you can put in your TSP (Thrift Savings Plan) is $20,500 under age 50 and $27,000 over 50 with the catch up.

But once you’ve maxed out your TSP, what do you do then? Or, if you aren’t yet maxing it out, is it really where you should be focusing your hard earned dollars?

This article will walk you through where to put your money to make sure you are on track for your goals. 

First Things First

Like I said above, I love it when I see people maxing out their TSP. 

However, you should not be maxing out your TSP if you have high-interest debt (aka credit cards!, etc.). 

The C Fund in the TSP has earned, on average, 10%/year, but if you are paying 20% on credit cards then you are losing big time!

You should always put enough in your TSP to get the match, but after that, focus on your high-interest debt before investing further. 

Also, consider getting an emergency fund in place as well before investing more for retirement. Your emergency fund will help you stay out of debt in the future.

The Next Step

Once we get the basics taken care of, then we advance to the next personal finance level. Now you want to be investing as much as you can for retirement, and your TSP is often the best place to do that. 

Also, consider using the Roth TSP especially if you are early in your career!

The Roth TSP can make sense for A LOT of people and you can see the pros and cons here.

One big perk of using the Roth TSP is that you can actually get more value into your TSP. What does that mean? It means that putting $20,500/year in your Roth TSP is worth a lot more than putting $20,500/year in the traditional side, so using the Roth TSP can be a great way to ‘actually’ max out your TSP. 

Beyond the TSP

It is important to understand what investment options exist outside of the TSP so you know what makes the most sense for you.

Here are the 3 main options:

  1. Tradtional IRA
    • This account is similar to the traditional TSP and can be a great way to save more for retirement once you’ve maxed out your TSP.
  2. Roth IRA
    • This account is similar to the Roth TSP and can be a great way to put extra after-tax money away. 
  3. Brokerage Account
    • This is just a normal investment account you can open at most banks. The main advantage of this account is that there are no annual contribution limits so it can be a great fit for high earners who are already maxing out other accounts.

Note: Once your income goes over certain limits then you may not be able to contribute to IRAs. 

The Rest of Your Life

While I love saving for retirement, we can’t ignore the rest of your life. 

What other goals do you have?

Do you want to pay off your house by retirement? How much more would you have to pay every month to make this happen? 

Do you want to pay for your kid’s college? What about a big wedding? What about a big trip?

It is crucial to think about all your life’s goals as we all have limited time/money. We often have to prioritize the goals that are most important to ensure that they happen. 

About the Author

Dallen Haws is a Financial Advisor who is dedicated to helping federal employees live their best life and plan an incredible retirement. He hosts a podcast and YouTube channel all about federal benefits and retirement. You can learn more about him at Haws Federal Advisors.