By Andy Massanet, Fort Riley Public AffairsApril 23, 2018
FORT RILEY, Kan. -- For Department of the Army civilian employees covered by the Federal Employees' Retirement System, the Thrift Savings Plan is the most important part of a three-part system that makes up each retirement plan.
An employee's TSP joins with the FERS basic annuity and Social Security to form the entire retirement package for Federal workers, said Kristine Tiroch, a Branch Chief for the Army Benefits Center-Civilian, with as much as 75 percent of that total comprised of TSP contributions.
The good news is that more employees over the past year are taking out the maximum amount allowable in the TSP program, which is 5 percent, Tiroch said.
"The percent of Army serviced employees (supported by the ABC-C), who are contributing less than 5 percent of their salary to the TSP went down one percent to 30 percent of FERS employees," she said. "That's a good thing, but it's not as big as we want. We're always hoping for more employees to set aside that five percent."
Saving less than 5 percent means the employee is, in effect, saying "no" to free money from their government employer, Tiroch said. She added that many people now are having their retirement lives roughly equal to their career lives.
"So you'll need enough money to carry you through 20, 25, even 30 years of retirement," Tiroch said.
Another thing Tiroch cautions against is taking money out of TSP in the form of short terms loans to remedy short-term money problems and pocket extra disposable income, with the intention of paying it back. Don't do it, she said.
"When you take money out of your TSP account, it's not growing and compounding anymore and you can never get back to that same place (before you withdrew the money) again," she said.
Once employees are in the TSP system, a host of investment options open up and employees can decide how conservative or aggressive they wish to be in the financial market place.
According to the ABC-C 2018 National Financial Literacy Month newsletter, those options include the safest option called the G-Fund in which money is guaranteed by the U.S. Government and won't lose money. Index funds use other financial markets that could increase return, and an L Fund, or "Lifecycle" Funds, which use "professionally determined investment mixes … tailored to meet objectives built on various time horizons." Those horizons are based on an employee's anticipated date of retirement.
Another feature of TSP is one which employees who are beginning their TSP contributions late in their careers can still realize its benefits. According to the www.abc.army.mil website, additional contributions through the TSP Catch-Up plan, in addition to regular TSP contributions, can increase retirement funds and help overcome past years of underfunded retirement accounts.
To be eligible to make Catch-Up contributions, civilians must meet the requirements:
• You must be currently employed and in a pay status
• You must turn age 50 or older in the calendar year during which Catch-Up contribution deductions begin
• Contributing the maximum allowed to your regular TSP account or an amount that will cause you to reach the Internal Revenue Service annual maximum by the end of the calendar year.
Be advised that employees cannot make Catch-Up contributions by increasing contributions to your TSP account. TSPC contributions are separate from regular TSP contributions. If you meet the eligibility requirements listed above, you must complete a separate enrollment for TSPC contributions each year. Also, TSPC enrollments do not continue automatically from year to year.
Tiroch adds that the maximum amount employees can contribute to TSP in 2018 is $18,500 for regular contributions and $6,000 for TSPC contributions, and TSP and TSPC contributions can be started, changed or stopped at any time.
"Be aware that if the amount elected exceeds the amount of net pay for a particular pay period, no regular TSP or TSPC deductions will be taken for that pay period," she said.
"Employees may also receive an extremely small pay check if an election for a large contribution is made in error, so make sure the election showing is the amount of money per pay period you wish to contribute. Also, if you do not intend on contributing the maximum of $18,500 to your TSP account for 2018, you are not eligible to contribute to TSPC.
For more information on TSP contact the ABC-C at Fort Riley, 785-240- ABCC (2222), or call 1-877-276-9287.
You may also log onto www.abc.army.mil or contact the Thrift Savings Plan website at www.tsp.gov, or call 877-968-3778.