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Make a Plan to Save, and Watch Your Money Grow
Setting a goal and sticking to it is the path to a comfortable retirement.
We’re reaching the end of America Saves Week, a campaign managed by the Consumer Federation of America to encourage people to save money, reduce debt and build wealth.
Last year, more than 2,000 organizations participated in America Saves Week, reaching more than 22 million people who reported making a total of nearly $160 million in deposits to increase their savings. If you’re interested, it’s not too late to sign up for this year.
This year, many federal agencies, such as the Social Security Administration, Federal Emergency Management Agency, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency are taking part in America Saves Week to educate and motivate their employees to understand how saving to reach their financial goals is possible and will provide greater financial freedom.
The concepts behind America Saves Week apply to federal employees saving for retirement through the Thrift Savings Plan. Here are two facts to remember about saving:
Saving with a plan makes you two times more likely to meet your goal. Have you determined when you would like to retire and how much you’ll need to save to achieve your goal? Start by understanding the three parts of the Federal Employees Retirement System: the FERSretirement benefit, Social Security, and TSP investments. Find out when you’re eligible to start receiving your retirement benefit, then see how its estimated value changes if you keep working past your first eligibility. Set up an online Social Security account to learn more about your future benefit. Once you have a better understanding of these two defined benefits, then you can set a savings goal for your defined contribution plan—the TSP. The TSP offers webinars and calculators to help you.
The easiest and most efficient way to save is to do it automatically using split deposit. Federal workers and retirees are permitted to have a portion of their paycheck or retirement benefit deposited into a savings account as an allotment. In some cases, you can have two such allotments. This allows you to establish a “pay yourself first” deposit towards other savings goals such as a vacation fund, new car savings, or longer term goals such as a down payment on your first home or a college savings allotment for your children. The TSP follows this principle by encouraging employees to allocate a portion of their biweekly salary and getting the reward of agency matching funds and the ability to reduce your tax liability by saving pre-tax dollars in the traditional TSP or to get tax-free growth in the Roth TSP.
“Start small, think big,” the America Saves organization says. It also says that thinking like a saver looks different for everyone, and that “saving for your past (reducing debt), present (emergency fund), and future (long term savings such as retirement, education, and homeownership) is essential in creating financial stability.”
I remember when the TSP started, they used slogans on their brochures and posters. In 1994, it was “Little by little soon becomes a lot,” a Tanzanian proverb. In 1996, it was “Start dwelling on your future, build a solid foundation with the TSP.” By all accounts, the TSP has been a success in helping federal employees plan and save for their retirement. As of the end of December, the FERS participation rate was 95%, with 84% contributing at least 5% of their salary in order to receive the full agency match. The average account balance for a FERS employee was $177,410.
The America Saves website has many inspiring stories of how individuals have saved to pay down debt, established an emergency fund, and jump-started their retirement savings. If you’re among them, good for you. If you’re not, then there’s no better time than now to start.
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