Contributing enough to TSP to maximize the match.

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Contributing enough to TSP to maximize the match.

Postby gkaplan » Mon Feb 04, 2013 10:09 am

This is a stupid question, I know, but I have to ask the question. How do I calculate how much I need to contribute to my TSP to maximize my agency match? (My agency automatically contributes one percent of my basic pay each pay date. My agency also matches the first five percent of the pay I contribute each pay day. The first three percent of pay that I contribute will be matched dollar-for-dollar; the next two percent will be matched fifty cents on the dollar.)

As far back as I can remember, I have been maxing out my contributions, so this has never been an issue; however, I am experiencing some financial difficulties that should be resolved in about six months. I was thinking of stopping my TSP contributions for six months and then back-loading my contributions in the last four or five months of the year to make up the deficiency. I think, though, that I should contribute at least enough to maximize the match.

Thank you very much, and I apologize for my substandard math skills.
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Re: Contributing enough to TSP to maximize the match.

Postby NYBoglehead » Mon Feb 04, 2013 10:36 am

If they match dollar for dollar on the first 3 percent, and fifty cents on the dollar for the next 2 percent, then contributing 5 percent will get you 80 cents on the dollar in matching contributions. This is in addition to the 1 percent they already contribute.

Not knowing what you pay is of course makes it impossible to give you a bi-weekly dollar amount that you need to contribute (or contribute later in the year to catch up).
Last edited by NYBoglehead on Mon Feb 04, 2013 11:42 am, edited 1 time in total.
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Re: Contributing enough to TSP to maximize the match.

Postby rkhusky » Mon Feb 04, 2013 10:43 am

5% of gross pay.
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Re: Contributing enough to TSP to maximize the match.

Postby Zagor » Mon Feb 04, 2013 11:23 am

To get the entire 5% matching you must contribute 7%.

If you contribute 3%, they contribute 3%
If you contribute 4%, they contribute 3.5%
If you contribute 5%, they contribute 4%
If you contribute 6%, they contribute 4.5%
If you contribute 7%, they contribute 5%.
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Re: Contributing enough to TSP to maximize the match.

Postby noobie » Mon Feb 04, 2013 11:37 am

Zagor wrote:To get the entire 5% matching you must contribute 7%.

If you contribute 3%, they contribute 3%
If you contribute 4%, they contribute 3.5%
If you contribute 5%, they contribute 4%
If you contribute 6%, they contribute 4.5%
If you contribute 7%, they contribute 5%.


This is wrong. You need to contribute 5% to get the entire match.

If you contribute 0%, they contribute 1%
If you contribute 1%, they contribute 2%
If you contribute 2%, they contribute 3%
If you contribute 3%, they contribute 4%
If you contribute 4%, they contribute 4.5%.
If you contribute 5%, they contribute 5%.
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Re: Contributing enough to TSP to maximize the match.

Postby NYBoglehead » Mon Feb 04, 2013 11:44 am

noobie wrote:
Zagor wrote:To get the entire 5% matching you must contribute 7%.

If you contribute 3%, they contribute 3%
If you contribute 4%, they contribute 3.5%
If you contribute 5%, they contribute 4%
If you contribute 6%, they contribute 4.5%
If you contribute 7%, they contribute 5%.


This is wrong. You need to contribute 5% to get the entire match.

If you contribute 0%, they contribute 1%
If you contribute 1%, they contribute 2%
If you contribute 2%, they contribute 3%
If you contribute 3%, they contribute 4%
If you contribute 4%, they contribute 4.5%.
If you contribute 5%, they contribute 5%.


+1

OP, all you need to do is calculate the dollar amount that'll give you the 5% of your salary for the year. If you have to lower/halt TSP contributions to take care of your emergency, then just make sure the total dollar amount is contributed by the end of the year in order to take advantage of the full match.

I know sometimes things come up that are beyond our control and don't mean to be a jerk, but this shows the importance of maintaining an emergency fund.
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Re: Contributing enough to TSP to maximize the match.

Postby hoppy08520 » Mon Feb 04, 2013 12:42 pm

NYBoglehead wrote:OP, all you need to do is calculate the dollar amount that'll give you the 5% of your salary for the year. If you have to lower/halt TSP contributions to take care of your emergency, then just make sure the total dollar amount is contributed by the end of the year in order to take advantage of the full match.

Hold on, I could be wrong, but I'm not sure if you can hit the pause on your contributions for six months and then "over-contribute" after those six months and then have matching contributions "catch up":

TSP wrote:How to get the max.
In order to get the maximum Agency Matching Contributions, you must not only contribute 5% of your basic pay each period, but you must also contribute all year long. If you reach the IRS annual limit before the end of the year, your contributions (and consequently, your Agency Matching Contributions) will stop.

(emphasis added by me)

Source: TSP.gov page on matching.

Also on that same page:
TSP wrote:Contributions above 5% of your pay will not be matched. If you stop making regular employee contributions, your matching contributions will also stop..

Unless I'm reading the TSP documentation wrong, OP, if you hit the pause button for six months, then you will lose part of your match for that six months, and you can't get it back even if you contribute extra in the last six months of the year. Therefore you must carefully make sure that your contributions are:

  • At least 5% every pay period, to get the full match.
  • Not so high and not so front-loaded that you hit the $17,500 IRS contribution limit prematurely, which will cause your contributions to stop, and consequently the agency matching to stop. You can front-load contributions earlier in the year, as long as you make sure you have enough left over to do at least 5% of your salary all year long
If at all possible, try to keep the full 5% going without interruption. That 5% will put you on course for well under the $17,500 maximum contribution, but you can contribute more toward the end of the year to make up for the under-contributions early in the year.
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Re: Contributing enough to TSP to maximize the match.

Postby NYBoglehead » Mon Feb 04, 2013 1:00 pm

hoppy08520 wrote:
NYBoglehead wrote:OP, all you need to do is calculate the dollar amount that'll give you the 5% of your salary for the year. If you have to lower/halt TSP contributions to take care of your emergency, then just make sure the total dollar amount is contributed by the end of the year in order to take advantage of the full match.

Hold on, I could be wrong, but I'm not sure if you can hit the pause on your contributions for six months and then "over-contribute" after those six months and then have matching contributions "catch up":

TSP wrote:How to get the max.
In order to get the maximum Agency Matching Contributions, you must not only contribute 5% of your basic pay each period, but you must also contribute all year long. If you reach the IRS annual limit before the end of the year, your contributions (and consequently, your Agency Matching Contributions) will stop.

(emphasis added by me)

Source: TSP.gov page on matching.

Also on that same page:
TSP wrote:Contributions above 5% of your pay will not be matched. If you stop making regular employee contributions, your matching contributions will also stop..

Unless I'm reading the TSP documentation wrong, OP, if you hit the pause button for six months, then you will lose part of your match for that six months, and you can't get it back even if you contribute extra in the last six months of the year. Therefore you must carefully make sure that your contributions are:

  • At least 5% every pay period, to get the full match.
  • Not so high and not so front-loaded that you hit the $17,500 IRS contribution limit prematurely, which will cause your contributions to stop, and consequently the agency matching to stop. You can front-load contributions earlier in the year, as long as you make sure you have enough left over to do at least 5% of your salary all year long
If at all possible, try to keep the full 5% going without interruption. That 5% will put you on course for well under the $17,500 maximum contribution, but you can contribute more toward the end of the year to make up for the under-contributions early in the year.


Thanks for the correction Hoppy. It seems like you are not mistaken in reading the rules on this. That policy in all honesty seems slightly unfair.
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Re: Contributing enough to TSP to maximize the match.

Postby rkhusky » Mon Feb 04, 2013 1:15 pm

NYBoglehead wrote:
Thanks for the correction Hoppy. It seems like you are not mistaken in reading the rules on this. That policy in all honesty seems slightly unfair.


But it makes the computer algorithm rather simple: grab the gross pay and TSP contribution for the current check, compute the ratio, deposit the corresponding match in the TSP account. Also easily handles the situations where your pay varies during the year.
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Re: Contributing enough to TSP to maximize the match.

Postby VictoriaF » Mon Feb 04, 2013 1:34 pm

There has been no decision yet on the annual base salary increases, but if it happens (however unlikely) remember to adjust your TSP contributions accordingly.

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Re: Contributing enough to TSP to maximize the match.

Postby NYBoglehead » Mon Feb 04, 2013 1:36 pm

rkhusky wrote:
NYBoglehead wrote:
Thanks for the correction Hoppy. It seems like you are not mistaken in reading the rules on this. That policy in all honesty seems slightly unfair.


But it makes the computer algorithm rather simple: grab the gross pay and TSP contribution for the current check, compute the ratio, deposit the corresponding match in the TSP account. Also easily handles the situations where your pay varies during the year.


I'm not saying it's not easier for the bookkeeping and administration.

It just seems to me that if two employees contribute to the TSP (for example purposes) in a given year, Employee A gets favorable treatment IMO by contributing $500/mo and receiving the full match while Employee B contributes $1000/mo for half the year but misses out on the full match.
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Re: Contributing enough to TSP to maximize the match.

Postby rkhusky » Mon Feb 04, 2013 1:54 pm

VictoriaF wrote:There has been no decision yet on the annual base salary increases, but if it happens (however unlikely) remember to adjust your TSP contributions accordingly.

Victoria


If you are trying to just hit the matching amount, it is probably easier to put in a percentage of salary, rather than a fixed dollar amount.
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Re: Contributing enough to TSP to maximize the match.

Postby rkhusky » Mon Feb 04, 2013 1:57 pm

NYBoglehead wrote:
rkhusky wrote:
NYBoglehead wrote:
Thanks for the correction Hoppy. It seems like you are not mistaken in reading the rules on this. That policy in all honesty seems slightly unfair.


But it makes the computer algorithm rather simple: grab the gross pay and TSP contribution for the current check, compute the ratio, deposit the corresponding match in the TSP account. Also easily handles the situations where your pay varies during the year.


I'm not saying it's not easier for the bookkeeping and administration.

It just seems to me that if two employees contribute to the TSP (for example purposes) in a given year, Employee A gets favorable treatment IMO by contributing $500/mo and receiving the full match while Employee B contributes $1000/mo for half the year but misses out on the full match.


I messed up a few years ago and did not realize that I would get 27 paychecks during the year, instead of the usual 26. Since I max-out my contribution, I lost the match for my last paycheck. Not a big amount, but aggravating nonetheless.
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Re: Contributing enough to TSP to maximize the match.

Postby VictoriaF » Mon Feb 04, 2013 2:10 pm

rkhusky wrote:
VictoriaF wrote:There has been no decision yet on the annual base salary increases, but if it happens (however unlikely) remember to adjust your TSP contributions accordingly.

Victoria


If you are trying to just hit the matching amount, it is probably easier to put in a percentage of salary, rather than a fixed dollar amount.


Good point. I contribute the maximum and have not been paying attention to the percentage option.

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Re: Contributing enough to TSP to maximize the match.

Postby gkaplan » Mon Feb 04, 2013 2:59 pm

rkhusky wrote:5% of gross pay.



I think this is the easiest way for me to think of this and not addle my already math-challenged brain.
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Re: Contributing enough to TSP to maximize the match.

Postby gkaplan » Mon Feb 04, 2013 3:01 pm

Thanks to all who responded to what most would consider an obvious answer.
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Re: Contributing enough to TSP to maximize the match.

Postby gkaplan » Mon Feb 04, 2013 4:54 pm

One more question. Can I still max out my catchup contribution, even if I'm only otherwise contributing five percent of my gross salary.
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Re: Contributing enough to TSP to maximize the match.

Postby VictoriaF » Mon Feb 04, 2013 5:09 pm

gkaplan wrote:One more question. Can I still max out my catchup contribution, even if I'm only otherwise contributing five percent of my gross salary.


I don't think so. But does it matter? If you want to contribute more than the matched amount but less than the maximum possible contribution, you could do that.

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Re: Contributing enough to TSP to maximize the match.

Postby Taz » Mon Feb 04, 2013 8:37 pm

gkaplan wrote:One more question. Can I still max out my catchup contribution, even if I'm only otherwise contributing five percent of my gross salary.



No. You must be
"making regular contributions to a civilian or uniformed services TSP account (or both), and/ or an equivalent employer plan (such as a 401(k), 403(b), or 408(k)(6) plan) that will equal the maximum allowed by the Internal Revenue Code (IRC), which is $17,000 for 2012 and $17,500 for 2013."


https://www.tsp.gov/PDF/formspubs/oc03-03.pdf
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Re: Contributing enough to TSP to maximize the match.

Postby gkaplan » Mon Feb 04, 2013 8:46 pm

Taz wrote:
gkaplan wrote:One more question. Can I still max out my catchup contribution, even if I'm only otherwise contributing five percent of my gross salary.



No. You must be
"making regular contributions to a civilian or uniformed services TSP account (or both), and/ or an equivalent employer plan (such as a 401(k), 403(b), or 408(k)(6) plan) that will equal the maximum allowed by the Internal Revenue Code (IRC), which is $17,000 for 2012 and $17,500 for 2013."


https://www.tsp.gov/PDF/formspubs/oc03-03.pdf



Okay. Thanks. You, too, Victoria.
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Re: Contributing enough to TSP to maximize the match.

Postby baw703916 » Mon Feb 04, 2013 8:53 pm

For the catch-up contributions, you must certify that you expect to contribute the maximum amount in regular contributions over the course of the year. There doesn't appear to be an inforcement mechanism to penalize you if that doesn't happen, nor does it appear to say anywhere that the maximum in regular contributions must be made evenly over the course of the year. So, someone who foresees financial stresses for part of the year could reduce the regular contributions for part of the year and still make catch-up contributions, provided there was a bona fide expectation of making the maximum regular contributions for the year.

In any event, catch-up contributions are not treated differently than regular contributions under the tax code.
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Re: Contributing enough to TSP to maximize the match.

Postby gkaplan » Fri Feb 15, 2013 12:21 pm

These last two posts seem contradictory. Am I reading them correctly?

Thank you for your patient responses.
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Re: Contributing enough to TSP to maximize the match.

Postby Taz » Fri Feb 15, 2013 1:57 pm

gkaplan wrote:These last two posts seem contradictory. Am I reading them correctly?

Thank you for your patient responses.


I think you are overthinking it. Seems to me that if you are 50 or older and your only TSP/401 type contributions are in the TSP, you can contribute up to $23k, but to go above $17.5K you have to fill out Form TSP-1-C. As always, the match amount does not apply.

If you have outside employment which permits you to have a 401k account and contributed to that in an amount which when added to your TSP goes over $23k, then you would have excess contributions and have to fix that.
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Re: Contributing enough to TSP to maximize the match.

Postby gkaplan » Fri Feb 15, 2013 4:30 pm

Taz wrote:
gkaplan wrote:These last two posts seem contradictory. Am I reading them correctly?

Thank you for your patient responses.


I think you are overthinking it. Seems to me that if you are 50 or older and your only TSP/401 type contributions are in the TSP, you can contribute up to $23k, but to go above $17.5K you have to fill out Form TSP-1-C. As always, the match amount does not apply.

If you have outside employment which permits you to have a 401k account and contributed to that in an amount which when added to your TSP goes over $23k, then you would have excess contributions and have to fix that.


You may be right that I am over thinking this, but it might be that I'm not understanding something here, so let me reiterate my situation and my question(s).

I am currently maxing out my TSP, both my regular contribution ($17,500 annually) and my catchup contribution ($5,500 annually). Rounded, that works out to be $674 and $212, respectively, for my bi-weekly regular and bi-weekly catchup contributions.

I want to temporarily – two or three months – reduce my regular contribution but contribute enough to maximize the match. (I think that would mean I would have to contribute about $85 bi-weekly.) At the end of the two or three months, I would resume maxing out my regular contribution. In fact, I would increase my contribution from the current $674 to an amount that would, by the end of the year, make up for the shortfall.

Can I max out my catchup contribution if I reduce my regular contribution? If not, what amount, if any, can I make as my catchup contribution?

Thanks, again, for your patience.
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Re: Contributing enough to TSP to maximize the match.

Postby dharrythomas » Fri Feb 15, 2013 8:37 pm

Gordon,

You need 5% to get the maximum matching contribution.

The information on catch-up contributions is available at TSP.gov. If you want more exact that what you're getting here, you should contact them.

The requirement for making catch-up contributions is that you be on track to maiximize your regular contributions. For whatever reason, they don't want you to use the catch-up contribution if you're not maxing out the regular contribution. Frankly, I can't figure out why you'd need to do that :confused Once your cash squeeze is over, you can recalcuate what's required for catch-up. If you wanted to put additional money over the 5% but less than your regular contribution, just make it a regular contribution.

Good Luck

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Re: Contributing enough to TSP to maximize the match.

Postby gkaplan » Fri Feb 15, 2013 9:50 pm

Thanks, Harry. I think I'll call TSP Tuesday morning. (I assume they are closed Monday.)
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Re: Contributing enough to TSP to maximize the match.

Postby grabiner » Sat Feb 16, 2013 12:15 am

VictoriaF wrote:
gkaplan wrote:One more question. Can I still max out my catchup contribution, even if I'm only otherwise contributing five percent of my gross salary.


I don't think so. But does it matter? If you want to contribute more than the matched amount but less than the maximum possible contribution, you could do that.


There is no practical difference between catch-up and regular contributions; the catch-up contributions are simply the amount you contribute in a year beyond the $17,500 IRS maximum for younger employees. For example, if you contribute $700 per pay period, then you hit $17,500 in the 25th pay period, so your final $700 is technically a catch-up, but you still get the match. (If you are under the age limit, you won't be allowed to contribute that $700 in the 26th pay period and will lose the match.)
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Re: Contributing enough to TSP to maximize the match.

Postby Kernschatten » Sat Feb 16, 2013 5:48 am

While you seem to have your answer, the TSP website has a great image that breaks down the match that might be benificial to others:
https://www.tsp.gov/planparticipation/e ... cyMatching
Image
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Re: Contributing enough to TSP to maximize the match.

Postby baw703916 » Sat Feb 16, 2013 11:08 am

grabiner wrote:
VictoriaF wrote:
gkaplan wrote:One more question. Can I still max out my catchup contribution, even if I'm only otherwise contributing five percent of my gross salary.


I don't think so. But does it matter? If you want to contribute more than the matched amount but less than the maximum possible contribution, you could do that.


There is no practical difference between catch-up and regular contributions; the catch-up contributions are simply the amount you contribute in a year beyond the $17,500 IRS maximum for younger employees. For example, if you contribute $700 per pay period, then you hit $17,500 in the 25th pay period, so your final $700 is technically a catch-up, but you still get the match. (If you are under the age limit, you won't be allowed to contribute that $700 in the 26th pay period and will lose the match.)


I agree with you David. Although the way the catch-up contributions are actually administered is kind of strange (imagine that, the government doing something in a counterintuitive way ;) ). Rather than just saying that if you are 50 or over, your contribution limit is $22,500 instead of $17,500, the catch-up contributions are treated as a completely different entity (in the TSP contribution breakdown, and in the enrollment mechanism--you have to sign up annually), even though, as you say, there's no practical difference.

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Re: Contributing enough to TSP to maximize the match.

Postby Default User BR » Sat Feb 16, 2013 1:32 pm

baw703916 wrote:I agree with you David. Although the way the catch-up contributions are actually administered is kind of strange (imagine that, the government doing something in a counterintuitive way ;) ). Rather than just saying that if you are 50 or over, your contribution limit is $22,500 instead of $17,500, the catch-up contributions are treated as a completely different entity (in the TSP contribution breakdown, and in the enrollment mechanism--you have to sign up annually), even though, as you say, there's no practical difference.

That's not particularly strange. MyMegaCorp does similar things. You have to explicitly designate contributions as catch-up. That's actually good, as this contribution is outside of the normal one, which is limited to 25% of salary. It would be bad if the catch-up ate up part of that. Catch-up can be as much as 50%, to allow intensive contributing at year-end.

Catch-up contributions are not eligible for matching, while after-tax non-Roth are. The regular contributions switch to after-tax when the deferral limit is reached, not catch-up. I'm not 100% sure what they do if you contribute to catch-up and don't make the deferral limit. Probably reclassify some or all of the catch-up as regular.


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Re: Contributing enough to TSP to maximize the match.

Postby Epsilon Delta » Sat Feb 16, 2013 1:39 pm

Default User BR wrote:That's not particularly strange. MyMegaCorp does similar things. You have to explicitly designate contributions as catch-up. That's actually good, as this contribution is outside of the normal one, which is limited to 25% of salary.

But the 25% limit is most likely an attempt the comply with a rule that was repealed when Reagan was in office and serves no purpose in this century. They could have updated that at the same time they modified the plan to accept catchup contributions.
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Re: Contributing enough to TSP to maximize the match.

Postby stan1 » Sat Feb 16, 2013 2:01 pm

Furlough may throw a monkey wrench into your planning.
Probably want to have a "Plan B" on the shelf in case you need to do something different.
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Re: Contributing enough to TSP to maximize the match.

Postby gkaplan » Sat Feb 16, 2013 3:11 pm

stan1 wrote:Furlough may throw a monkey wrench into your planning.
Probably want to have a "Plan B" on the shelf in case you need to do something different.


I am aware of that possibility. That's why I have kicked my own can down the road for two months or so.
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Re: Contributing enough to TSP to maximize the match.

Postby tacster » Sat Feb 16, 2013 7:28 pm

Default User BR wrote:
baw703916 wrote:I agree with you David. Although the way the catch-up contributions are actually administered is kind of strange (imagine that, the government doing something in a counterintuitive way ;) ). Rather than just saying that if you are 50 or over, your contribution limit is $22,500 instead of $17,500, the catch-up contributions are treated as a completely different entity (in the TSP contribution breakdown, and in the enrollment mechanism--you have to sign up annually), even though, as you say, there's no practical difference.

That's not particularly strange. MyMegaCorp does similar things. You have to explicitly designate contributions as catch-up. That's actually good, as this contribution is outside of the normal one, which is limited to 25% of salary. It would be bad if the catch-up ate up part of that. Catch-up can be as much as 50%, to allow intensive contributing at year-end.

Catch-up contributions are not eligible for matching, while after-tax non-Roth are. The regular contributions switch to after-tax when the deferral limit is reached, not catch-up. I'm not 100% sure what they do if you contribute to catch-up and don't make the deferral limit. Probably reclassify some or all of the catch-up as regular.


Brian


Here's what they did when that happened to me: Nothing.

One year I contributed a fixed amount per paycheck (which failed to add up to the full deferral limit :oops: ), at the same time I also contributed the maximum catch-up amount. The TSP did nothing, and I didn't even realize I'd failed to max out my contributions until over a year later. From a rational standpoint there's no reason for that to be "wrong" since the contributions all go to the same place and are treated the same way. I was a little nervous about it once I figured out what happened, but evidently they don't care, or just haven't caught up with me yet...
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Re: Contributing enough to TSP to maximize the match.

Postby VictoriaF » Sat Feb 16, 2013 10:37 pm

gkaplan wrote:
stan1 wrote:Furlough may throw a monkey wrench into your planning.
Probably want to have a "Plan B" on the shelf in case you need to do something different.


I am aware of that possibility. That's why I have kicked my own can down the road for two months or so.


The OPM has updated Guidance for Administrative Furloughs in February 2013. Most agencies are likely to keep furloughs at 22 or fewer days (for each affected employee). The salary hit will be less than 10%. I don't foresee any impact on the payroll deductions or TSP contributions.

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Re: Contributing enough to TSP to maximize the match.

Postby Default User BR » Sun Feb 17, 2013 4:49 pm

tacster wrote:
Default User BR wrote:I'm not 100% sure what they do if you contribute to catch-up and don't make the deferral limit. Probably reclassify some or all of the catch-up as regular.

One year I contributed a fixed amount per paycheck (which failed to add up to the full deferral limit :oops: ), at the same time I also contributed the maximum catch-up amount. The TSP did nothing, and I didn't even realize I'd failed to max out my contributions until over a year later. From a rational standpoint there's no reason for that to be "wrong" since the contributions all go to the same place and are treated the same way. I was a little nervous about it once I figured out what happened, but evidently they don't care, or just haven't caught up with me yet...

Theoretically, it might have mattered at MyMegaCorp, because catch-up is not eligible for matching. So if the catch-up wasn't reclassified at a regular contribution, then you'd miss some match. However, I read the summary plan description (always an excellent idea) and you can only make catch-up contributions in a pay period if you are contributing at least 8% to regular contributions. So one would be getting the max match, which is 75% of the first 8%.


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Re: Contributing enough to TSP to maximize the match.

Postby stan1 » Sun Feb 17, 2013 5:18 pm

VictoriaF wrote:
The OPM has updated Guidance for Administrative Furloughs in February 2013. Most agencies are likely to keep furloughs at 22 or fewer days (for each affected employee). The salary hit will be less than 10%. I don't foresee any impact on the payroll deductions or TSP contributions.

Victoria


Actually I can see impact for both payroll deductions and TSP for some people, depending upon how they have set up their direct deposits and TSP contributions.

Salary hit might be less than 10% for the year, but could be closer to 20% in some pay periods if two furlough days were ordered in the same pay period (e.g. 22 consecutive Fridays April through Sept, 2013). This could definitely create short term cash flow problems for some employees. Personally, I will need to adjust my direct deposit setup to reduce the amount I have direct deposited into my investment account each pay period so that my checking account has enough in it to pay bills.

TSP 1% agency automatic contributions and up to 4% matching contributions are based on percentage of basic pay earned each pay period, so those would drop during the pay periods where salary is reduced because of furlough. Employees who have their employee contribution set up as a percentage of salary would see the dollar value of their contribution decrease, although those who have their contribution set up as a fixed dollar amount would not see their contribution decrease. Hopefully TSP will put this explanation up on their website soon.
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Re: Contributing enough to TSP to maximize the match.

Postby VictoriaF » Tue Feb 19, 2013 3:07 pm

Stan,

You are right. I misinterpreted the OPM Guide as one day per pay-period being the most likely scenario. If the maximum number of furlough days per year is 22, and the number of pay-periods is 26, that seemed to make sense. The new information is clear about the 20% cut being based on one day per week.

Furthermore, I did not realize that the Agency's match is based on a specific pay-period pay rather than the nominal salary. This is not consistent with the fact that Agencies don't match performance awards.

Here is a Washington Post article on the impact of furloughs on TSP, Loss of pay through furloughs could mean less in retirement savings accounts. This furlough thing seems messier and messier, even if it were flawlessly executed.

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Re: Contributing enough to TSP to maximize the match.

Postby rkhusky » Fri Mar 08, 2013 2:49 pm

VictoriaF wrote: This furlough thing seems messier and messier, even if it were flawlessly executed.

Victoria


It will especially messy for those that are in the lower pay bands and have a lot of payroll deductions, like taxes, SS, retirement, TSP, various insurances (medical, dental, vision, life, long term care), childcare and healthcare FSA's, charity. They may find that their paychecks don't cover the deductions and either have to pay out of their pocket or cancel something.

I did hear that even though employees will be paying less into their retirement accounts, their retirement payout will not be affected, since that is not based on the amount of the paycheck.
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Re: Contributing enough to TSP to maximize the match.

Postby VictoriaF » Fri Mar 08, 2013 3:44 pm

rkhusky wrote:I did hear that even though employees will be paying less into their retirement accounts, their retirement payout will not be affected, since that is not based on the amount of the paycheck.


"Retirement" has two parts: TSP contributions and the annuity. During the furloughs the Agency's match will be smaller, and thus the total TSP contributions will be smaller even if one's own contributions do not change. The annuity depends on the years of service and the salary during the best three years. Those who are close to retirement may, in fact, get a lower annuity because their pay is lower during one of their "best years."

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Re: Contributing enough to TSP to maximize the match.

Postby rkhusky » Fri Mar 08, 2013 4:09 pm

VictoriaF wrote:
rkhusky wrote:I did hear that even though employees will be paying less into their retirement accounts, their retirement payout will not be affected, since that is not based on the amount of the paycheck.


"Retirement" has two parts: TSP contributions and the annuity. During the furloughs the Agency's match will be smaller, and thus the total TSP contributions will be smaller even if one's own contributions do not change. The annuity depends on the years of service and the salary during the best three years. Those who are close to retirement may, in fact, get a lower annuity because their pay is lower during one of their "best years."

Victoria


But the salary that is used for the "best years" calculation is that in your official documentation, not what shows up in your paycheck.
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Re: Contributing enough to TSP to maximize the match.

Postby VictoriaF » Fri Mar 08, 2013 4:17 pm

rkhusky wrote:But the salary that is used for the "best years" calculation is that in your official documentation, not what shows up in your paycheck.


Are you sure about that? If true, that's the best news since the furloughs were announced.

Thanks,
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Re: Contributing enough to TSP to maximize the match.

Postby rkhusky » Fri Mar 08, 2013 4:27 pm

VictoriaF wrote:
rkhusky wrote:But the salary that is used for the "best years" calculation is that in your official documentation, not what shows up in your paycheck.


Are you sure about that? If true, that's the best news since the furloughs were announced.

Thanks,
Victoria


I wouldn't bet the farm on it (but maybe $100). Base salary is listed on the SF 50. So, unless you get a new SF 50, that is your base salary upon which the High-Three is computed.
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Re: Contributing enough to TSP to maximize the match.

Postby Iorek » Fri Mar 08, 2013 4:31 pm

rkhusky wrote:
VictoriaF wrote:
rkhusky wrote:But the salary that is used for the "best years" calculation is that in your official documentation, not what shows up in your paycheck.


Are you sure about that? If true, that's the best news since the furloughs were announced.

Thanks,
Victoria


I wouldn't bet the farm on it (but maybe $100). Base salary is listed on the SF 50. So, unless you get a new SF 50, that is your base salary upon which the High-Three is computed.


I think that's right. (As I understand it, even for part-time workers, they use the official base salary, and then pro-rate according to the number of hours worked.)
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Re: Contributing enough to TSP to maximize the match.

Postby VictoriaF » Fri Mar 08, 2013 4:42 pm

rkhusky wrote:I wouldn't bet the farm on it (but maybe $100). Base salary is listed on the SF 50. So, unless you get a new SF 50, that is your base salary upon which the High-Three is computed.


Great. (But they do calculate the TSP match based on the actual earnings and not SF 50.)

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Re: Contributing enough to TSP to maximize the match.

Postby rkhusky » Fri Mar 08, 2013 5:10 pm

VictoriaF wrote:Great. (But they do calculate the TSP match based on the actual earnings and not SF 50.)
Victoria


Yes.

After a little more digging:
High-3 average salary computations are based on periods of creditable service. Thus, periods of nonpay status of 6 months or less in a calendar year that fall within an employee’s average salary period are included in the calculation of the average salary using the rate of basic pay in effect during the period of nonpay status.

Quoted from: http://www.opm.gov/policy-data-oversigh ... -programs/
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Re: Contributing enough to TSP to maximize the match.

Postby stan1 » Fri Mar 08, 2013 5:42 pm

Yep, retirement is fortunately based of SF-50 -- not LES/W-2 income.

Now -- if only I was CSRS with 40 years!
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Re: Contributing enough to TSP to maximize the match.

Postby bayview » Mon Mar 25, 2013 12:31 am

Late to this thread, which I found while searching for something else, and I wanted to add an fyi for when you resume max contributions:

gkaplan, be aware that DFAS or someone has a horrible lag time in implementing requested changes in your TSP allocation. I received a big grade jump late in 2012 and tried to max out my contributions (originally 5% for the full agency match) for the remainder of the year by sending my entire paycheck (less mandatory deductions, including my all-important parking pass) to TSP. I got immediate confirmations from myPay or whatever it's called of the changes made, but I didn't actually see them until at least two paychecks later.

It got pretty comical toward the end, because first I tried entering a dollar amount to be withheld. When it didn't show up 3 weeks later, when I thought I would see it, I went in and changed the dollar amount to 100%. Of course, that wound up having a similar delay, although the original dollar amount finally appeared. When all was said and done, I wound up having three paychecks in a row of $0, but all were for 2013, meaning that (a) I didn't manage to increase my 2012 contributions, and (b) I can't just enter the dollar figures for 2013 that will total $17,500 and $5,500 for catch-up. I've twiddled with the deductions in hopes that it will all even out by the end of the year, but it will probably be 2014 before I can have any confidence in maxing out.

And I once tried to call HR for help or advice, but let's just say that they are already fully occupied in trying to bring new employees in.

So all that just to say that you may wind up getting a bit frazzled when you try to get back on track later this year.

Anyway, good luck to you during the next 6 months, and yes, you do have to contribute at least 5% each check to get your full match. Hope all goes well with you.
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Re: Contributing enough to TSP to maximize the match.

Postby VictoriaF » Mon Mar 25, 2013 8:00 am

bayview wrote:Late to this thread, which I found while searching for something else, and I wanted to add an fyi for when you resume max contributions:

gkaplan, be aware that DFAS or someone has a horrible lag time in implementing requested changes in your TSP allocation. I received a big grade jump late in 2012 and tried to max out my contributions (originally 5% for the full agency match) for the remainder of the year by sending my entire paycheck (less mandatory deductions, including my all-important parking pass) to TSP. I got immediate confirmations from myPay or whatever it's called of the changes made, but I didn't actually see them until at least two paychecks later.


Congratulations with the grade jump.

Our TSP contributions are changed in the Electronic Benefits Information System (EBIS); I don't know who runs it. The changes are applied to the next payperiod, and so you have to wait until the current payperiod ends, the next payperiod ends, and a few more days until the paycheck becomes available.

bayview wrote:It got pretty comical toward the end, because first I tried entering a dollar amount to be withheld. When it didn't show up 3 weeks later, when I thought I would see it, I went in and changed the dollar amount to 100%. Of course, that wound up having a similar delay, although the original dollar amount finally appeared. When all was said and done, I wound up having three paychecks in a row of $0, but all were for 2013, meaning that (a) I didn't manage to increase my 2012 contributions, and (b) I can't just enter the dollar figures for 2013 that will total $17,500 and $5,500 for catch-up. I've twiddled with the deductions in hopes that it will all even out by the end of the year, but it will probably be 2014 before I can have any confidence in maxing out.


I have a spreadsheet mirroring my paycheck entries. In the beginning of a year, I create projected paycheck values for the entire year, including of course TSP contributions. I select the monthly dollar-value of TSP contributions so that during the last payperiod they would create excess over the annual maximum. When the last payperiod of a year comes, DFAS reduces my TSP contribution so that I precisely meet the maximum.

I find my spreadsheet very useful during years when the relationship between the end of the last payperiod and the end of the year is not immediately clear. But this year's furloughs will make tracking even more important.

bayview wrote:And I once tried to call HR for help or advice, but let's just say that they are already fully occupied in trying to bring new employees in.


HR are useless in these matters. The best you can expect from them is a good DFAS contact. Even that is not straightforward, you need a good DFAS contact, not any DFAS contact.

Cheers,
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Re: Contributing enough to TSP to maximize the match.

Postby gkaplan » Mon Mar 25, 2013 9:03 am

Employee Express processes my payroll transactions. They seem to be pretty good about updating changes. I'm going to change my TSP contribution amount the day after my current payday contribution shows up on the TSP website and allow for one pay period for the transaction to change my contribution to take effect.
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