Q&A: Should I front-load money into the TSP in the year I retire? Updated
Question
I will be retiring at the end of September 2025. I need to select a contribution amount per pay period for the TSP in 2025. 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 2025, from a tax benefit perspective, am I better off (assuming that I can afford it financially), to contribute the maximum amount for 2025 between the January 1 and September 30 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.
I will illustrate how to do this in both 2025 and 2026.
Let’s start with 2025. See this pay calendar for 2025: https://www.gsa.gov/buy-through-us/purchasing-programs/shared-services/payroll-shared-services/payroll-calendars/2025-payroll-calendar
You’ll notice, there are 19 pay-periods between Jan 1- September 30, but there are actually 20 pay days (Jan 3rd was a payday from a prior pay period). Also, there’s the final pay period which ends October 4th after you retire, which will be paid October 10th. So that’s a total of 21 paydays in 2025.
You would divide $31,000 / 21 = $1,476.19. This is amount you will need to contribute per pay period from the beginning of 2025 until you retire.
Since you were not contributing that amount per pay period (because you didn’t think you were going to retire before Dec. 31) we will need to know how much you contributed thus far to your TSP in 2025, and subtract that amount from the $31,000, and divide the rest into your remaining pay days. I hope that makes sense!
Let’s now do 2026. See this pay calendar for 2026: https://www.gsa.gov/buy-through-us/purchasing-programs/shared-services/payroll-shared-services/payroll-calendars/2026-payroll-calendar
You’ll notice, once again, that there are 19 pay-periods between Jan 1- September 30, but there are actually 20 pay days (Jan 2nd was a payday from a prior pay period). Also, there’s the final pay period which ends October 3rd after you retire, which will be paid October 9th. So that’s a total of 21 paydays in 2026.
In 2026, we don’t yet know the Max contribution amounts (as of this writing), but forecasts are expecting an increased Max TSP contribution amount of $32,500.
You would divide $32,500 / 21 = $1,547.62. This is amount you will need to contribute per pay period from the beginning of 2026 until you retire.
If you want this amount to come out of your first 2026 paycheck on Jan 2nd, you will need to make this change in your payroll before the last pay period starts, which means before December 14th, 2025 (i.o.w. between November 30 – December 13).
Try to front load as much as possible into traditional (not Roth), for two reasons:
- Because that will give you the tax deduction you are looking for
- The tax savings will give you a larger cushion of transition money to help you while receiving interim checks, before your full retirement checks kick in.
I hope this helps!
Stephen
