Optimizing Your 3 Federal Retirement Income Streams
Strategic approaches can significantly amplify your control over retirement income from your FERS annuity (pension), Social Security, and Thrift Savings Plan (TSP).
3 Strategies to Optimize Your FERS Pension
- Extend Your Work Years for a Higher High-3 Salary: Extending your employment by a year or two can substantially increase your High-3 salary, influencing your monthly pension amount.
- Utilize the FERS 10% Bonus: Continuing to work beyond retirement age can trigger the FERS 10% bonus, resulting in a higher pension. Retiring at 62 or later with at least 20 years of service boosts your annuity using a 1.1% formula, leading to a remarkable 10% increase in your monthly benefit.
- Accumulate Unused Sick Leave: While unused sick leave doesn’t enable immediate retirement, it contributes to calculating your pension. Including unused sick leave as creditable service can elevate your pension once you meet age and service requirements for an immediate FERS annuity.
“Maximizing the TSP 5% agency match is akin to acquiring free money through compound interest”
2 Strategies to Grow Your TSP Nest Egg
- Maximize the TSP 5% Agency Match: FERS employees receive a 5% agency match for TSP contributions. The initial 3% is matched dollar-for-dollar, with the subsequent 2% matched at 50 cents on the dollar. Additionally, your agency contributes 1% of your pay to your TSP automatically. Leveraging the TSP 5% agency match capitalizes on compound interest.
- Utilize TSP Catch-Up Contributions: Individuals aged 50 or older, or those turning 50 within the calendar year, can make TSP Catch-Up Contributions on top of regular contributions. For 2024, the standard TSP contribution limit is $23,000, while the Catch-Up Contribution limit is $7,500.
Optimizing Your Social Security Benefit
Delay Filing for Enhanced Credits: Postponing your filing beyond Full Retirement Age (FRA) accrues credits, increasing your benefit by 8% annually until age 70. Furthermore, your benefit is indexed for cost-of-living adjustments (COLA) for each year of delay.
Take a proactive approach – connect with an FRC® trained advisor to explore additional strategies for planning a financially secure federal retirement.
