When you retire, you will have the opportunity to pull income from three different sources: Your annuity, your Social Security benefits, and your Thrift Savings Plan (if you chose to contribute to it). This three-tiered system might contribute to greater stability, but of course nothing is guaranteed. Thorough planning is still necessary at every stage of the process, from early in your career to post retirement. The following four strategies can help you make the most of your retirement income.
Reach for the maximum. Each year that you contribute to your Thrift Savings Plan, you also lower your income tax liability for that year. And of course, contributing more can translate into faster growth. So try to reach the maximum contribution limit each year; it’s currently $18,000 annually.
Start catch-up contributions after you turn 50. At this age, you can now contribute an additional $6,000 per year to your TSP. You’ll reap greater income tax benefits, too – saving you even more money now.
Pay down your debts. Once you retire, your income will be fixed, based on Social Security benefits, your annuity payments, and withdrawals from your TSP. Unless you take on a part-time job, it will be difficult to increase income. So, a good bet is to reduce your expenses as much as possible, to stretch your income farther. One way to do this is by entering retirement free of debts, or carrying as little debt as possible.
Wait just another year or two. If you do become concerned about your future retirement income, postponing retirement can help you get better prepared. You will be adding more years to your service, and potentially increasing your Social Security benefits, too. And, of course, you’ll continue saving via your Thrift Savings Plan, and paying down debts. Another neat bonus of postponing retirement is that you could accumulate more annual leave, which some federal employees choose to “cash out” when they retire.
These are some common strategies, but there are other ways of maximizing retirement income. Give us a call, and we can offer more advice based upon your exact situation.
