2021 brought at least one significant change to the way TSP catch-up contributions are designated on an employee’s paystub. In past years, employees ages 50 and older would make elections designating their regular TSP contributions and a separate election for catch-up contributions. In 2021, the old way was replaced with TSP’s new spillover method, in hopes of creating a simpler and streamlined process for TSP participants.
Last month we began a discussion on when to draw Social Security. This question is best addressed at an individual level considering the unique implications and objectives of each case. We framed four key factors to examine when deciding the right time to take Social Security. For a quick refresher on the first two factors – the cashflow decision and the break-even analysis — see last month’s blog. Our next two factors examine how the age one draws Social Security can impact death benefits and total assets.
The thought of starting another career after federal retirement can seem counterintuitive. For some people, working in retirement is…not retirement! Despite the paradoxical nature of such a decision, many federal retirees do make this choice. If you’re considering returning to the workforce in retirement, or simply pondering life after your federal career concludes, here are some options to contemplate if an encore career is the right move.
One of the most important decisions a federal retiree must make is when to draw Social Security. The internet is flooded with opinions on this topic and many new blogs and videos released claim to have figured out the perfect age; however, this one-size-fits-all approach to the Social Security question inherently ignores the uniqueness of each individual case. The age that makes the most sense for one individual may not be wise for another person based on a number of factors. Although the Social Security question is not as easy to answer as some proclaim, there are certain factors around which the decision can be framed. Understanding Social Security in light of four key factors can go a long way in helping an individual decide what age to begin drawing Social Security for FERS Retirees.
FERS employees generally have three primary ways to build for retirement: a FERS pension, Social Security, and the Thrift Savings Plan (TSP). The last of these three — the TSP — is a government-sponsored 401(k) program that allows federal workers the opportunity to accumulate retirement savings. Though the TSP does have a certain amount of flexibility, there are annual TSP contribution limits. Once this ceiling is reached, an employee can no longer contribute to TSP for that year; however, that does not mean an employee is unable to accumulate retirement savings. IRAs or Individual Retirement Arrangements allow federal employees to accumulate retirement savings in much the same way as the TSP, with a few significant differences. Let’s review the 2021 IRA contribution limits.
Becoming Emotionally Prepared
Moving from a decades-long career to a new era of retirement is a significant transition. For many federal employees, profession defines who they are and provides structure in their lives. Are you ready to retire? Are you emotionally ready for the shift? Bringing your plans and dreams for federal retirement into a roadmap will help you successfully navigate this new phase of life. Before retirement, map out your new identity and purpose for the next 30 or so years. Leverage the motivational power of a bucket list!
A government employee can contribute to the Thrift Savings Plan (TSP) throughout a federal career. The TSP is a retirement savings account for federal employees and is an important part of a FERS retirement plan. A federal employee may contribute a significant portion of savings into the TSP over the years. This leads many to ask an important question, “What happens to my TSP when I die?” Considering death is never an enjoyable task but is one that is necessary to make sure your money ends up in the right hands after your passing.
Many prospective federal retirees worry about the possibility of predeceasing their loved ones, and how these loved ones would be provided for in this scenario. Taking care of those you love in the event of your death is a natural desire, and although no one wants to think about death, it’s certainly wise to have a plan in place. One decision a federal employee has to make is whether or not to leave a survivor benefit to a spouse. A survivor benefit means that if a federal retiree dies prior to the spouse, this spouse will receive a portion of the federal retiree’s annuity. Please note that there are several survivor benefit options and choosing to leave a survivor benefit will result in a reduction to one’s annuity. However, the topic of survivor benefits often brings up the question, “Can I leave a survivor benefit to someone other than my current spouse?” The answer is…maybe. Let us unpack what this ambiguous answer means.
2020 has been a whirlwind. From COVID-19 to the presidential election and just about everything in between, the first year of the new decade has been anything but normal, typical, or boring. Federal employees across the country saw drastic changes to the way they work and live, and no aspect of federal employment was unaffected by the swift moving current of change brought on by the Coronavirus. Markets experienced unforeseen and unprecedented periods of volatility and the Thrift Savings Plan (TSP) reflected these rapid redirections in fund value. In the midst of such a turbulent year, how can one finish 2020 well? Let’s discuss three keys to wrapping up 2020.
FERS employees have the option to contribute to the Thrift Savings Plan (TSP) while working. The TSP is essentially a government – sponsored 401(k) program that allows federal workers the chance to accumulate retirement savings. FERS workers get the added benefit of a five percent match to their TSPs if they contribute at least five percent of their own salaries. The TSP is a vital part of a federal retiree’s retirement plan and one that should not be overlooked; however, there are limits to how much an employee can contribute each year. The 2021 TSP contribution limits are listed below; it’s vital to be familiar with these rules and regulations to be able to take full advantage of the options available as a federal employee.