Q&A: Should I front-load money into the TSP in the year I retire?

Question

I will be retiring at the end of March 2021. I still need to select a contribution amount per pay period for the TSP in 2021. As you know, there is a maximum contribution limit + a max catch-up allowance for people 50 years or older. 

Since I will not be working an entire year in 2021, from a tax benefit perspective, am I better off (assuming that I can afford it financially), to contribute the maximum amount for 2021 between the January 1 and March 31 pay periods? Yes, I realize that if something changes such that I transition to a “phased retirement” status (which I think is not likely at this point) then I would lose the employer matching component. 

Answer

Yes, you are correct, you can accelerate your TSP contributions.

The way you’d do so is this:

See this pay calendar for 2021: 

https://www.gsa.gov/cdnstatic/GSA_Payroll_Calendar2021.pdf

You’ll notice, there are 6 pay-days between Jan 1- March 31, but there will also be the payday on April 2 after you retire. So that’s a total of 7.

You can divide $26,000 / 7 = $3,714.29.

Depending on your other deductions, that number may be slightly out of reach.

But, try to front load as much as possible. Into traditional.

I hope this helps!

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