Harness the Power of the TSP for Greater Retirement Flexibility

Nest Egg

Retirement is the ability to voluntarily refrain from active employment while continuing to pay for financial obligations. While that goal is easy to imagine, the opportunity to reach it depends entirely on financial resources. For federal employees, that opportunity includes a significant advantage.

The Thrift Savings Plan (TSP) is a private sector 401k equivalent for federal employees. The plan allows employees to contribute their own dollars into a retirement account with an agency matching contribution of up to 5% for members of the Federal Employee Retirement System (FERS). Civil Service Retirement System (CSRS) employees can also participate in the TSP, though they don’t receive matching contributions.

Contributions to the account can’t exceed $17,500 for 2013, though individuals 50 and older can make additional catch-up contributions of up to $5,500. There are two options when making contributions that affect how the money taxed – the traditional TSP and the Roth TSP.

The traditional TSP offers investors the chance to deposit money into the retirement account before taxes. When money is withdrawn from the account at retirement, the amount received is subject to taxation. Conversely, money contributed into the Roth TSP is taxed as it’s deposited. When money in the Roth is withdrawn at retirement, the amount disbursed is not generally subject to taxation.

There are various options to consider when investing in the TSP, but the only way to gain the advantages the program has to offer is to become a regular investor. It’ll not only make a post-working lifestyle a more affordable one, it could also increase peace of mind in knowing that the healthy next egg is there waiting to support the many retirement possibilities.

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