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!
