July 6, 2012
By Angela Croslan, ACS Financial Readiness
FORT JACKSON, S.C. -- If you are in the workforce, there is time to save for etirement. The earlier you start the better, but it's not entirely too late if you are still working. There are many different options that can add to your financial security.
The Thrift Savings Plan is a retirement savings and investment plan for federal employees and members of the uniformed services. It is a defined contribution plan, meaning that the retirement income you receive from your TSP account will depend on how much you (and your agency, if you are eligible to receive agency contributions) put into your account during your working years and the earnings accumulated over that time.
Another popular option are Individual Retirement Accounts. IRAs provides you with a valuable opportunity for tax-advantaged savings. It's important to evaluate your situation before making a decision. Compare the benefits of both traditional and Roth IRAs before making a decision. Knowing what lifestyle you want to have and the financial obligations you will have plays a huge part in the planning.
With retirement, it's not a one size fits all. Discussing your personal financial goals with a financial planner is a great place to start. Mapping out your total assets, retirement living expenses, and how much you need to save to cover expenses and taxes should be discussed with a financial planner.
Be sure to consider all possible sources of income. Social Security will fund a portion of retirement for most working adults. You may also receive benefits from a traditional defined benefit pension plan. Add in money you've saved in a TSP, an individual retirement account or other savings vehicles, as well as any expected inheritances.
The obvious way of saving more and spending less is not always the easiest way. Consider contributing the maximum to your TSP and if at all possible, contribute to an IRA as well. If you meet the requirements, do the catch-up contributions. If you are at least 50 years old (or will be 50 during the calendar year), and if you have made or will make the maximum amount of employee contributions for the calendar year ($17,000 in 2012), you may also make catch-up contributions to your TSP account.
Be careful not to overextend yourself with saving and investing. Always leave room for your monthly living expenses and emergencies.
Live with less and pay yourself first. Even though putting away small amounts each month may seem like a drop in the bucket, it can grow quickly due to compound interest. Compound interest is interest that is paid on both the principal and also on any interest earned from the past.
Taking on a part-time job or selling items you no longer need can help boost your savings. Getting rid of things also helps in preparing yourself for downsizing in retirement. Now is the time to close your savings gap, so don't procrastinate.
No matter what method you choose to boost your retirement income, the most important thing is that you do something. Failing to plan is planning to fail. Use available resources, such as ACS financial counselors, to help guide you in the right direction.
For more information on a personal financial plan or if interested in meeting with a financial counselor, contact Army Community Services at 751-5256.