Q: How much money should I have in my TSP? (2024)

FAQs

Q: How much money should I have in my TSP? ›

There's a one-word answer to that question: More! There is no such thing as too much money in the Thrift Savings Plan. If you want your TSP balance to be able to generate an inflation-indexed annual income of $10,000, most financial planners will suggest that you have a $250,000 balance at the time you retire.

By age 35, aim to save one to one-and-a-half times your current salary for retirement. By age 50, that goal is three-and-a-half to six times your salary. By age 60, your retirement savings goal may be six to 11-times your salary. Ranges increase with age to account for a wide variety of incomes and situations.

Your best bet is to stick with the C, S and I Funds. Here's the ratio we recommend for your portfolio: 80% in the C Fund, which is tied to the performance of the S&P 500. 10% in the S Fund, which includes stocks from small- to mid-sized companies that offer high risk and high return.

How you distribute your money among the TSP funds should reflect your time horizon, or when in the future you'll need retirement income, and your risk tolerance. If you want to choose an investment option that will adjust automatically to manage risk over time, consider the Lifecycle Funds (L Funds).

The 4% rule is a popular retirement withdrawal strategy that suggests retirees can safely withdraw the amount equal to 4% of their savings during the year they retire and then adjust for inflation each subsequent year for 30 years.

Federal employees do a great job saving for retirement in the Thrift Savings Plan, and the numbers prove it. Here are a few of the outstanding statistics: Total TSP assets at the end of 2023 were $845 billion. 4,060,009 FERS TSP accounts with an average account balance of $175,692.

The Rule of 55 allows workers who leave their job during or after the year they turn 55 to avoid paying the 10% early withdrawal penalty on their retirement account distributions. It doesn't matter why you are leaving, but you must be at least 55 years old in the calendar year you are leaving your job.

Dave Ramsey's advice is to save 5% into the TSP to get the full match, then max out a Roth IRA, and then put more into the TSP if you are able to save more after that.

The G Fund is often considered the safest option among TSP funds.

Many participants choose to keep their money in the TSP because of the TSP's low-cost funds. And you can always move money into your TSP account by making rollovers from eligible employer plans and from traditional IRAs. You always control how your money in the TSP is invested, even if you aren't making contributions.

Can you put in too much money in TSP? ›

If you work for more than one employer in the same calendar year, it's possible to contribute too much and exceed the IRS limits. If you over contribute, you may request a refund of the excess amount from the TSP. For a limited in January each year, we make the Refund Request Form available.

If you are 591/2 or older, you can make withdrawals from your TSP account while you are still employed . You must pay income tax on the taxable portion of your withdrawal unless you roll it over to an IRA or other eligible employer plan .

The taxable portion of your withdrawal is subject to federal income tax at your ordinary rate. Also, you may have to pay state income tax. An additional IRS early withdrawal penalty of 10% may apply if you're under the age of 59½.

Age 40—three times annual salary. Age 45—four times annual salary. Age 50—five times annual salary. Age 55—six times annual salary.

A Roth TSP has higher contribution limits, automatic contributions, and matching contributions. However, the investment options are limited and at the moment you have to take RMDs at age 72. Roth IRAs have a great selection of investment options and they don't have RMDs.

The idea is that a retiree can with- draw 4 percent of their retirement account each year, year af- ter year, and not run out of money. For example, if your TSP is $400,000, then the 4 percent rule says you could withdraw $16,000 per year ($1,333 per month) for the rest of your life.

Currently, about 1.4% of TSP participants have portfolios worth a million dollars or more.

Let's walk through the scenario. With $300,000 planned for your use as a retiree, a retirement age of 50, and an anticipated life expectancy of 85 years, you need that money to last you 35 years. This should mean that your yearly income is around $8,571, and your monthly payment is around $714.

Average Monthly Retirement Income

According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.