Since its founding in 1986, the federal Thrift Savings Plan (or TSP) has helped millions of federal employees invest and save for retirement. And if you’re a federal employee, this plan can help you do the same! But where do you start, and how do you know how much money you need to contribute?
That’s where Thrift Savings Plan Calculators can help! These crucial tools pack a lot of good information in, letting you strategize your investments and savings the way you want. Read on to learn everything you need to know about using these TSP calculators!
What Are Thrift Savings Plan Calculators?
In addition to the general information the federal government provides on TSPs, they also have several pages with various TSP calculators. These calculators are designed to help employees figure out their accounts and savings.
There are a lot of different factors you need to pay attention to while using these calculators. These will affect how much you can put away, how much you’ll make, and other similar aspects of your TSP.
By paying attention and digging deep into these factors, you’ll be able to make a good plan moving forward. Having a good plan to follow can help you make smarter investments and maximize your savings in the long run!
Here are some of the most important things you need to pay attention to while using TSP calculators.
1. Your Take-Home Pay
One of the most critical things you can use a TSP calculator for is determining your take-home pay. This is the amount of money you’ll have in your pocket after taxes and contributions to your TSP.
This is so important because you need to ensure you’re bringing home enough money for all your current expenses! Setting money aside for the future is very useful, but it defeats the purpose if you’re broke right now!
That’s why there are TSP calculators to help you plan out your take-home pay. It may require some budgeting on your part, but once you figure out how much you actually need to bring home every paycheck, you can put a lot more into your savings plan!
2. Max Contributions
Every year, the IRS dictates a set amount as the maximum that people can contribute to savings plans like the TSP. Specifically, this cap is for tax-deferred plans and is known as the “IRS elective deferral limit.”
A calculator can tell you the maximum amount you can contribute every paycheck or year. If you’re able to, this is a great way to get your savings account growing as quickly as possible while also getting employer matching to your contributions.
3. Contribution Type
There are different kinds of contributions and accounts you can create. It’s very important to use a calculator to figure out what kind of plan and account you want to have! The different types of plans and contributions have their own pros and cons, so it’s important to study them carefully.
For example, a TSP has several advantages over an IRA plan. Each plan has its own contribution rules and strategies, which a financial professional can help you navigate.
Roth vs. traditional, after-tax vs. before-tax, and other comparisons are key things that a calculator can help you understand. You can see how much money you’ll pay in taxes now vs. later, and can decide which kind of plan will work best for you.
4. Growth and Savings
This is where the magic happens! You want your plan to grow over time from your contributions, and it’s helpful to know how much you’ll have when you retire.
Although market fluctuations make it impossible to get exact values, a calculator can give you estimates based on accounts’ past performance to give you an idea of how much you’ll have. You can input how much you’re contributing, how many years you have, employer matches, and anything else that will affect your plan’s total savings.
Once you know how much your account will have when you retire, you can adjust your plans to fit your needs. If your savings account will be too small, you can look at increasing your contributions, forming another retirement account, or otherwise changing your plans. It’s better to be prepared now rather than be blindsided when you retire!
5. Matching Contributions
Most employers will match your contributions up to a certain amount for a TSP. Take advantage of this matching as much as possible, as it’s a great way to double your contributions!
Financial calculators can show you your employer’s matching levels while helping you determine how much you can make. You’d be amazed how even a little bit of matching now can grow over the years!
If at all possible, you should always meet your employer’s matching maximum for your TSP. This is basically free money, so try to get as much of it as you’re allowed.
You can also borrow loans from your TSP. It’s not recommended to do this for everyday expenses, but if you have an emergency, the extra funds can be quite helpful!
Right now, the minimum loan amount you can borrow is $1,000, and the maximum is $50,000. You can use a TSP loan calculator to see how much you can borrow, the interest rates, and how much you’ll owe when you pay it all back. To borrow from your TSP account, you’ll need to be a federal employee currently in pay status.
7. Which Funds Should You Invest In?
Financial calculators can even help you determine which funds to invest in with your TSP! There are multiple kinds of funds that a TSP offers. These are G, F, C, S, and I funds.
They each have their own strengths and drawbacks, and it’s recommended to consult with an investment professional to figure out the best plan for you. Each fund will pull stocks from different areas of the market, helping you diversify to improve your overall investment plan’s growth.
Learn More About Planning Your Investment Account!
While Thrift Savings Plan calculators can help you with a lot of your financial planning, sometimes it can still be tough to figure out everything on your own! That’s why getting input from an outside professional is so helpful for your investment and retirement funds.
So if you’d like to know more about TSPs or if you’d like to start strategizing your investments, it’s time to schedule a consultation! Our network of licensed agents are always ready to help you navigate your retirement plans and financial strategies to help ensure your financial security.