3 Things Every Young Person Should Know About Federal Retirement

Would you pass up free money? “No” seems like the obvious answer, but some young Federal civilian employees are missing out on thousands of dollars from their agencies over time.

Since April is Financial Literacy Month, the Thrift Savings Plan has launched the “Take Five for Your Future” campaign to encourage participants to take full advantage of the matching money that’s available for their retirements.

In addition to releasing a YouTube video on the importance of saving early, we’ll blog here throughout the month. This week, we’ll discuss three important lessons about managing your TSP retirement account.

1. Contribute 5%.

If you’re covered under the Federal Employees Retirement System (FERS), then your agency will contribute up to 5% of your pay into your TSP retirement account with each paycheck. That’s on top of your salary. But you only get the full amount if you contribute 5% too.

That money can grow quickly: There are currently about 26,000 TSP participants younger than 35 with at least $100,000 in their accounts. Among those aged 35-44, more than 36,000 participants have saved at least a quarter-million dollars. And since these groups have a few decades left until retirement, their savings can grow even more.

No matter what your age, it’s always a good time to contribute to the TSP. But time is your biggest ally, so it’s important to start now. Don’t let free agency money slip away – you can never get it back.

2. Choose from 5 Funds.

Deciding how to invest your savings is daunting, but the TSP’s strength is its simplicity. We offer:

  • 5 core funds you can mix and match based on your own investment strategy, and
  • 5 Lifecycle funds that are professionally designed based on when you’ll need your money. For example, our experts designed the L 2050 Fund for people who plan to begin using their retirement savings in 2045 or later.

3. Make Changes in 5 Minutes.

Got a few minutes? It doesn’t take long to make changes. Sign into your agency’s electronic payroll system and select the “Thrift Savings Plan” option. You can contribute either a percentage of your salary or a fixed dollar amount.

If your agency doesn’t have an electronic system, you can also complete Form TSP-1 and send it to your agency’s payroll or benefits office. Call us at 1-877-968-3778 and choose option 3 for help.

Next Week: 5 Ways to Add $100,000 to Your Retirement Savings

About the TSP: Similar to private sector 401(k) plans, the TSP is a defined-contribution plan that provides Federal employees the opportunity to save for additional retirement security. If you have a question or comment about this post, please contact us directly. We are unable to respond to messages on this site.

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