Achieving your financial goals in a shorter time frame.
Remember the Seven Dwarfs song, “Heigh-Ho, Heigh-Ho (It’s Home From Work We Go)”? How about the 1988 variant by David Chamberlain, “I Owe, I Owe (It’s Off to Work I Go)”?
You might be singing the latter tune for longer than you’d like as you try to reduce your debt and expenses while you work to increase your retirement income. Here are five tips that might help you to reach your retirement nest egg goal a little more quickly:
Decrease your taxes to allow you to save more money for retirement. Consider using a high deductible health plan with a health savings account for tax-free savings to cover health care expenses. Use a flexible spending account to pay for out of pocket health care costs and dependent care expenses up to an annual limit. Increase your contributions to the traditional Thrift Savings Plan, where you save using pre-tax dollars. (On the other hand, if you save after-tax dollars now in the Roth TSP option, you’ll reduce your taxable income in retirement. It’s a case of pay the IRS now or pay it later.)
If you’re under the Federal Employees Retirement System, keep working. At least until you qualify for Social Security retirement, the 1.1 percent FERS annuity calculation factor and cost of living adjustments to your benefit. In other words, work until you’re at least 62 years old with at least 20 years of service.
Increase your savings, in the TSP and elsewhere. The Securities and Exchange Commission’s Compound Interest Calculator allows you to quickly and easily project the growth of your current account balances and future contributions. (For the TSP monthly savings, be sure to include not only your contributions, but agency automatic and matching contributions.) The TSP’s own How Much Will My Savings Grow calculator can be used to run a variety of interest rate scenarios. You can then convert the balance you have projected into retirement income by using the TSP’s Retirement Income Calculator.
Make sure you’re getting credit for all of your past federal and military service. One of the main factors in determining the value of your retirement benefit is your years and months of creditable service. Every month of service is worth 1/12 of a percentage of your high-three average salary. The percentage varies from 1 percent to 1.1 percent for FERS and 2 percent for Civil Service Retirement System employees. Is all of your past employment properly documented showing the beginning and ending dates of each appointment along with your retirement coverage and work schedule? Records of your past federal service should be filed in your electronic official personnel folder. Locate these records and make a copy to keep in your files.
Pay any applicable deposits into the retirement system. In the course of making sure your service is properly documented, you might discover that you may have to pay a deposit to the retirement fund in order to get full credit for this service in your annuity. The rules are different for civilian and military service credit and also vary for CSRS and FERS. Deciding whether or not to pay a deposit is a personal choice, based on how much you have to pay and the effect it would have on your benefit. A retirement specialist in your human resources office should be able to help you sort things out.
Follow these suggestions, and you just might be able to exceed your expectations for a secure retirement--and more quickly.