TSP Contributions - Retiring Mid Year

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HarleyGuy
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TSP Contributions - Retiring Mid Year

Post by HarleyGuy » Thu Nov 07, 2019 10:33 pm

Considering retiring from federal service after almost 19 years in Aug 2020, age 61. Was wondering if it was a good idea to change my allotments to max out my Roth 401k and Catch up before I retire, since I won't be working the remainder of the year. Have no plans to tap the TSP for quite a few years. Thanks in advance.

ionball
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Re: TSP Contributions - Retiring Mid Year

Post by ionball » Thu Nov 07, 2019 10:49 pm

Yes, good idea. Be sure to string out the contributions all the way through your retirement date in order to get maximum employer matching contributions. The employer match only occurs for each pay period that you make contributions.

02nz
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Re: TSP Contributions - Retiring Mid Year

Post by 02nz » Thu Nov 07, 2019 10:58 pm

But it sounds like you're not 100% sure yet? I wouldn't change TSP contributions until you're sure. If you change contributions to max contributions in August but later decide to retire in October, for example, you will lose the 4% agency matching (and receive only the 1% agency automatic) between August and October. At a minimum, leave yourself enough room so that you can contribute at least 5% and thus capture the max match the remainder of the year.

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Jerry55
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Re: TSP Contributions - Retiring Mid Year

Post by Jerry55 » Fri Nov 08, 2019 12:32 am

ionball wrote:
Thu Nov 07, 2019 10:49 pm
Yes, good idea. Be sure to string out the contributions all the way through your retirement date in order to get maximum employer matching contributions. The employer match only occurs for each pay period that you make contributions.
I would certainly do this, and adhere to the substance mentioned above.....
HOWEVER....
Check and see if the maximum the gov will contribute is or isn't limited to 5% per pay period.
In other words, if you max out $1,200 per payday, 5% of your pay is only $250 and that's all they'd match.
Either way, I'd still max it out regardless, as suggested by Ionball above.

I retired CSRS, so matching is not part of my repertoire :greedy :sharebeer
Retired CSRS on 12/19/2012 @ age 57 w/39 years | Good Bye Tension, Hello Pension !!!

3504PIR
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Re: TSP Contributions - Retiring Mid Year

Post by 3504PIR » Fri Nov 08, 2019 12:42 am

I would do exactly that unless you have other needs as you retire. I retired in August and cut my contributions in January down to a fraction of what they had been as I had a lot of immediate costs associated with retiring. I had maxed my contributions consistently prior including the added amount I could add to them the year I turned 50. If you have sufficient cash reserves then push those contributions to make up for the short year.

As mentioned above, even it out so you receive full matching through your separation including any leave you may take at the end of your service. As a side note, I was fortunate to be approved for an extended leave at the end of my time as it was more advantageous for me to remain on the payroll rather than taking a lump sum payment.

Striker
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Re: TSP Contributions - Retiring Mid Year

Post by Striker » Fri Nov 08, 2019 7:11 am

Wouldn’t retiring at 62 increase your multiplier and give you 20 years in ? This would
have a greater positive impact on your retirement income.

Mako
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Re: TSP Contributions - Retiring Mid Year

Post by Mako » Fri Nov 08, 2019 8:13 am

Striker wrote:
Fri Nov 08, 2019 7:11 am
Wouldn’t retiring at 62 increase your multiplier and give you 20 years in ? This would
have a greater positive impact on your retirement income.
Yeah, if you have any flexibility you should consider waiting until 62 since you'll be so close anyway and would have under 20 years. 62 gets a 1.1% multiplier rather than 1%, and retiring before 62 and with under 20 years service also gets a reduction of 5% per year (or 5/12% per month) under 62.

Assuming you turn 61 in August 2020 and retire:
Aug 2020: 19 years service and retire at 61: 19 x 1% x 0.95: pension = 18.05% of high 3.
Aug 2021: 20 years service and retire at 62: 20 x 1.1%: pension = 22% of high 3.

MichDad
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Re: TSP Contributions - Retiring Mid Year

Post by MichDad » Fri Nov 08, 2019 8:30 am

I retired at age 62 on March 31, 2018 with a FERS pension and over 35 years of service. I compressed all of my TSP contributions and catch-up contributions into the nine (I believe) pay periods I worked that year. My actual net pay each pay period was very low. I received the five percent government match only for my contributions for those pay periods.

MichDad

rkhusky
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Re: TSP Contributions - Retiring Mid Year

Post by rkhusky » Fri Nov 08, 2019 8:48 am

HarleyGuy wrote:
Thu Nov 07, 2019 10:33 pm
Considering retiring from federal service after almost 19 years in Aug 2020, age 61. Was wondering if it was a good idea to change my allotments to max out my Roth 401k and Catch up before I retire, since I won't be working the remainder of the year. Have no plans to tap the TSP for quite a few years. Thanks in advance.
+1 to comments above. Look into retiring at age 62. Maximize TSP contributions and government contributions for the months that you will work in the retirement-shortened year.

Morgan Dollar 1921
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Re: TSP Contributions - Retiring Mid Year

Post by Morgan Dollar 1921 » Fri Nov 08, 2019 8:56 am

Mako wrote:
Fri Nov 08, 2019 8:13 am
Striker wrote:
Fri Nov 08, 2019 7:11 am
Wouldn’t retiring at 62 increase your multiplier and give you 20 years in ? This would
have a greater positive impact on your retirement income.
Yeah, if you have any flexibility you should consider waiting until 62 since you'll be so close anyway and would have under 20 years. 62 gets a 1.1% multiplier rather than 1%, and retiring before 62 and with under 20 years service also gets a reduction of 5% per year (or 5/12% per month) under 62.

Assuming you turn 61 in August 2020 and retire:
Aug 2020: 19 years service and retire at 61: 19 x 1% x 0.95: pension = 18.05% of high 3.
Aug 2021: 20 years service and retire at 62: 20 x 1.1%: pension = 22% of high 3.
Agree, there are planners, books, and a federal employee organization that can detail and help you with this, my DW left after many years at age 60 due to health, she wanted to stay but the situation just did not permit it. Regardless there are other considerations such as unused sick leave time, the annual leave lump sum pay out, better dates to retire on due to immediate switching from pay status to retired status. Also are you aware of the paperwork delay at OPM? Any unused sick leave that you may have adds to your years of service under FERS, however I do not recall if that portion is allowed to be used to move you into the bonus multiplier, (1.1% x 20 years). We do not need to know all of your personal reasons, but you should consider the impact your monthly OPM income during retirement. I am guessing that waiting one year or so will add at least $100 a month to your OPM FERS pension. Then you will also be impacting your Social Security numbers. You did not mention the FERS supplement, many are eligible for that until age 62, if leaving early, but not sure how your situation will impact you in respect to that. Some time spent on this could be a very good return for you.

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SquawkIdent
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Re: TSP Contributions - Retiring Mid Year

Post by SquawkIdent » Fri Nov 08, 2019 9:24 am

ionball wrote:
Thu Nov 07, 2019 10:49 pm
Yes, good idea. Be sure to string out the contributions all the way through your retirement date in order to get maximum employer matching contributions. The employer match only occurs for each pay period that you make contributions.
+1

Barefoot
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Re: TSP Contributions - Retiring Mid Year

Post by Barefoot » Fri Nov 08, 2019 11:40 am

Morgan Dollar 1921 wrote:
Fri Nov 08, 2019 8:56 am
however I do not recall if that portion is allowed to be used to move you into the bonus multiplier, (1.1% x 20 years).
It does not

Morgan Dollar 1921
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Re: TSP Contributions - Retiring Mid Year

Post by Morgan Dollar 1921 » Fri Nov 08, 2019 12:19 pm

Barefoot wrote:
Fri Nov 08, 2019 11:40 am
Morgan Dollar 1921 wrote:
Fri Nov 08, 2019 8:56 am
however I do not recall if that portion is allowed to be used to move you into the bonus multiplier, (1.1% x 20 years).
It does not
that was what my memory was telling, but I did not feel like checking, LoL and never want to mislead.

Thanks for confirming.

MathIsMyWayr
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Re: TSP Contributions - Retiring Mid Year

Post by MathIsMyWayr » Fri Nov 08, 2019 12:51 pm

I have been in a similar situation of leaving in the middle of a year for some time. I subtract the full yearly amount of the employee contribution to get the maximum employer match from the maximum annual employee contribution amount. I try to accelerate the contribution of the remainder on top of the minimum employee contribution as soon and as much as possible.
An example:
Yearly salary: $156,000 in 26 payments of$ 6,000 per pay period
Minimum employee contribution for max. match: 8% ($480 per pay period)
Remainder: $27,000-26*$480 = $14,520
You try to finish up $14,520 as soon as possible on top of $480. If you contribute an extra $1,815 per pay period for 8 pay periods, you will be left only with the minimum contribution of $480 per pay period (total of $8,640). As your exit schedule become firm, you may be able to fill up the remainder within the next 2-3 pay period by the time you exit.

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Wiggums
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Re: TSP Contributions - Retiring Mid Year

Post by Wiggums » Fri Nov 08, 2019 1:32 pm

HarleyGuy wrote:
Thu Nov 07, 2019 10:33 pm
Considering retiring from federal service after almost 19 years in Aug 2020, age 61. Was wondering if it was a good idea to change my allotments to max out my Roth 401k and Catch up before I retire, since I won't be working the remainder of the year. Have no plans to tap the TSP for quite a few years. Thanks in advance.
Congratulations on your upcoming retirement.

Topic Author
HarleyGuy
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Re: TSP Contributions - Retiring Mid Year

Post by HarleyGuy » Fri Nov 08, 2019 5:44 pm

I am aware of waiting to age 62 and 20 years service and the 1.1% of high three. Just don't want to delay, life's too short and I have other things I want to do. I am retired military so I have a pension, medical benefits, VA disability, wife is retired civil service and eligible for social security soon at 62. I have enough savings to tide us over until I hit 62 and then collect my FERS pension as well. On top of a sizable 401k from maxing out traditional and catch up contributions in C, I & S funds, as well as TSP ROTHs as soon as TSP allowed them. Want to thank everyone for their advice. Just have to do the math now.

Teddy4
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Re: TSP Contributions - Retiring Mid Year

Post by Teddy4 » Fri Nov 08, 2019 6:05 pm

Morgan Dollar 1921 wrote:
Fri Nov 08, 2019 8:56 am
however I do not recall if that portion is allowed to be used to move you into the bonus multiplier, (1.1% x 20 years).
Sick leave can bump one to the 1.1% calculation for someone above age 62, but without 20 years' service (before sick leave is counted in). Check out OPM Benefits Administration Letter 18-103.

This could help you, HarleyGuy, if you are able to keep working until 62 and "almost 20" years of service.

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