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Retirement 101: Getting Started

If you were to poll a group of adults to find out when they started saving for retirement, the answers would probably vary greatly. Every person has a unique financial situation and money management style. So when, then, should you start saving for retirement? The answer is simple – as soon as possible!


The good news – as a federal employee, it’s highly likely that your agency has already been contributing a small amount towards your retirement. Nearly all federal employees are already receiving an automatic 1% contribution towards their Thrift Savings Plan (TSP).


How Much Should I Save?


As a federal employee, you can participate in the Thrift Savings Plan (TSP). The TSP is especially important for FERS employees because it is one of three parts of your retirement coverage. FERS employees hired after July 31, 2010 are automatically enrolled in the TSP, and 3% of your basic bay is being deducted from your paycheck each pay period. (Unless you elected to stop or change your contributions.)


Your agency has already started you on the path to retirement, but there’s a chance you’ll need to save more money to have the retirement you dream about. If you’re looking for a way to estimate how much money you’ll need for retirement, use the Federal Ballpark Estimate. This tool will give you an estimate of how much money you’ll have when it’s time to retire. If the numbers aren’t looking so great, increasing your contribution is the best thing to do.


Increasing Your Contribution

Changing your contribution from 3% to 5% might not seem like a significant difference, but take a look at the chart below.

Here, you see that changing your contribution by two percent increases your total contribution three percent. And, over time that small change will make a big difference, thanks to our friend compound interest.


Compounding is important, because you’ll earn interest not only on what you contribute, but on the money you’ve already earned. For example, if you contribute $100 to your TSP and it earns a 5% rate of return at the end of the year, you’ll have $105. The next year, you’ll earn 5% not just on your original $100 contribution, but on the total amount.


Check with your agency’s payroll office about their specific procedures to making a change to your TSP contribution amount.

Action Steps:

  • Use the Federal Ballpark Estimate tool to get an idea of what you’ll have in retirement at your current savings rate.

  • Contact your payroll office to increase your TSP contribution amount.

  • Use the Compound Interest Calculator to determine how much your money can grow over the years.

The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular individual or circumstance. This article is not intended to be a client-specific analysis or recommendation. Do not use this article as the sole basis for any financial decisions. Consider all relevant information. Information should not be considered as tax or legal advice. You should consult with your tax advisor and/or attorney regarding your individual circumstances.

© 2019 Tangerine Foundation. All rights reserved.


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