Updating my video for 2020, this includes the new pay chart and required contribution percentages based off of your pay grade….(read more)

LEARN MORE ABOUT: Thrift Savings Plans

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For those looking to save for retirement, the Thrift Savings Plan is an excellent option offered to federal employees and members of the military. It’s a defined-contribution retirement plan, much like a 401(k), that comes with several benefits, including low fees and the potential for matching contributions. However, like any retirement plan, it only works if you take advantage of it. Here are some tips for maxing out your Thrift Savings Plan in 2021.

1. Increase your contributions

The easiest way to maximize your TSP contributions is to increase them. Currently, the maximum contribution limit for 2021 is $19,500, with an additional catch-up contribution of $6,500 for those over 50 years old. Start by contributing as much as you can afford, and then increase your contributions when possible. If you receive a raise or pay off a debt, consider applying that extra money to your contributions.

2. Take advantage of employer matching

If your employer offers matching contributions, make sure you take full advantage of them. If you don’t contribute enough to receive the full match, you’re leaving free money on the table. For instance, if your employer offers to match 5% of your contributions, make sure you contribute at least 5% to receive that full match.

3. Use automatic contributions

Setting up automatic contributions is an effortless way to increase your TSP savings. That way, you’re not relying on your memory to contribute every time you get paid. You can set up automatic contributions through your employer’s payroll or through TSP’s online platform.

4. Consider a Roth TSP

The TSP offers both traditional and Roth options. With the traditional TSP, you contribute pre-tax dollars, and your contributions and earnings are taxed when you withdraw them. In contrast, with the Roth TSP, you contribute after-tax dollars, and your withdrawals in retirement are tax-free. Consider which option is best for you based on your current tax situation and projected retirement income.

5. Monitor your investments

The funds you choose to invest in can make a significant difference in your long-term returns. If you’re not comfortable choosing your investments, start with one of the TSP’s lifecycle funds, which are designed to adjust to your risk tolerance based on your age. Review your investments periodically and make changes as needed to ensure your portfolio stays balanced.

In conclusion, the Thrift Savings Plan is an excellent way to save for retirement, but it only works if you take advantage of it. By increasing your contributions, taking advantage of employer matching, using automatic contributions, considering a Roth TSP, and monitoring your investments, you can maximize your savings and ensure a comfortable retirement.