Maxing out TSP

[Anonymous]

Anonymous wrote:

Anonymous wrote:The SS and FERS doomsayers are drastically overstating their cases. It is possible that SS gets adjusted down from current scheme, but it's essentially a neglible possibility that you get nothing. Same with your FERs pension -- it may move to "high-5" payout or some other tweaks and adjustments but it won't be wiped out completely.

Given that you are in line for 2 pensions and 2 SS streams, you really are OK if you just continue with 10% total (5+5 match) into the TSP.

Given conservative projections, the TSP should hit something like $1M in 30-35 years. Conservatively, you're looking at another $50k+/year in 2 FERS pensions for 2 30-35 year careers, probably more depending on your income growth. Very conservatively, you'd also get another $40k per year in 2 SS payouts.

Those are all 2018 dollars. Even if you adjust the SS and FERs by 2/3, you're talking $60k per year plus whatever you can draw from your TSP. At the 4% rule, you could expect to take $40k per year from the TSP.

That gives you $100k per year in annual retirement income. That is the figure in 2018 dollars (the nominal number would be higher).

Even after taxes, given your current income and spending (and especially if you pay off a mortgage in the next 30 years), that puts you on track for a secure retirement.

Tl;dr: if you have extra room in your budget, by all means increase your TSP contributions. But if money is tight, then just stay the course. You are doing OK. As you get raises, make sure to increase your retirement contributions with each pay increase.

OP here. Thank you for this. This makes sense to me. If we max out our TSP and Roth IRA we would be saving, with the match, 36% of our HHI. I have never seen any financial adviser recommend saving 36% percent. Saving 36% plus the pension just seems completely ridiculous.

The way I have been thinking about it is that conservatively I think we can count on SS covering around 30% of our final salary and the pension another 25%. Figuring we can live on 75% of our final salary (which is pretty conservative given we want to move to a lower CoL area), then we will need our TSP to cover 20% of our final salary. Using the also conservative 4% draw down rule means we need to save 500% of our final salary. If our TSP contributions grow 3% faster than our salary increases (which seems very conservative), then with a 10% contribution (5%+ match), then we are there in 26 or 27 years.

Maybe we should bump our savings up to 15% or 20% of our HHI a year, but no way do we need to hit 36%.

I agree with this. Ignoring the pension just creates inaccurate results and skews the risk analysis. The FERS pension is not going away. The changes that have been made to it are for new employees, and they can't take away what you have already earned. It is deferred compensation that you have already contractually earned, for the federal government to renege on it would be a default just as much as refusing to pay Treasury bond holders, and if the government defaults, we will all be screwed generally and a higher TSP balance won't do much good.

[Anonymous]

I would just say that if you aren't in a position to max out your TSP, then it probably is not worth doing a Roth.

A Roth lets you put more money away for retirement, and gives you some flexibility in retirement, but the chances that you will actually have higher income in retirement than you do now seems pretty small (and I believe that even if taxes go up overall, less income still will mean lower brackets).

So for people maxing out their TSP, a Roth is great. I fully agree with the PP who said if you have room to save more than 5% it wouldn't be a bad thing but you should be ok at that level. However if that's where you -- between 5 and 10% of salary int o TSP-- don't bother with a Roth, just put more into pretax savings.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The SS and FERS doomsayers are drastically overstating their cases. It is possible that SS gets adjusted down from current scheme, but it's essentially a neglible possibility that you get nothing. Same with your FERs pension -- it may move to "high-5" payout or some other tweaks and adjustments but it won't be wiped out completely.

Given that you are in line for 2 pensions and 2 SS streams, you really are OK if you just continue with 10% total (5+5 match) into the TSP.

Given conservative projections, the TSP should hit something like $1M in 30-35 years. Conservatively, you're looking at another $50k+/year in 2 FERS pensions for 2 30-35 year careers, probably more depending on your income growth. Very conservatively, you'd also get another $40k per year in 2 SS payouts.

Those are all 2018 dollars. Even if you adjust the SS and FERs by 2/3, you're talking $60k per year plus whatever you can draw from your TSP. At the 4% rule, you could expect to take $40k per year from the TSP.

That gives you $100k per year in annual retirement income. That is the figure in 2018 dollars (the nominal number would be higher).

Even after taxes, given your current income and spending (and especially if you pay off a mortgage in the next 30 years), that puts you on track for a secure retirement.

Tl;dr: if you have extra room in your budget, by all means increase your TSP contributions. But if money is tight, then just stay the course. You are doing OK. As you get raises, make sure to increase your retirement contributions with each pay increase.

OP here. Thank you for this. This makes sense to me. If we max out our TSP and Roth IRA we would be saving, with the match, 36% of our HHI. I have never seen any financial adviser recommend saving 36% percent. Saving 36% plus the pension just seems completely ridiculous.

The way I have been thinking about it is that conservatively I think we can count on SS covering around 30% of our final salary and the pension another 25%. Figuring we can live on 75% of our final salary (which is pretty conservative given we want to move to a lower CoL area), then we will need our TSP to cover 20% of our final salary. Using the also conservative 4% draw down rule means we need to save 500% of our final salary. If our TSP contributions grow 3% faster than our salary increases (which seems very conservative), then with a 10% contribution (5%+ match), then we are there in 26 or 27 years.

Maybe we should bump our savings up to 15% or 20% of our HHI a year, but no way do we need to hit 36%.

I agree with this. Ignoring the pension just creates inaccurate results and skews the risk analysis. The FERS pension is not going away. The changes that have been made to it are for new employees, and they can't take away what you have already earned. It is deferred compensation that you have already contractually earned, for the federal government to renege on it would be a default just as much as refusing to pay Treasury bond holders, and if the government defaults, we will all be screwed generally and a higher TSP balance won't do much good.

Me too. Good analysis.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The SS and FERS doomsayers are drastically overstating their cases. It is possible that SS gets adjusted down from current scheme, but it's essentially a neglible possibility that you get nothing. Same with your FERs pension -- it may move to "high-5" payout or some other tweaks and adjustments but it won't be wiped out completely.

Given that you are in line for 2 pensions and 2 SS streams, you really are OK if you just continue with 10% total (5+5 match) into the TSP.

Given conservative projections, the TSP should hit something like $1M in 30-35 years. Conservatively, you're looking at another $50k+/year in 2 FERS pensions for 2 30-35 year careers, probably more depending on your income growth. Very conservatively, you'd also get another $40k per year in 2 SS payouts.

Those are all 2018 dollars. Even if you adjust the SS and FERs by 2/3, you're talking $60k per year plus whatever you can draw from your TSP. At the 4% rule, you could expect to take $40k per year from the TSP.

That gives you $100k per year in annual retirement income. That is the figure in 2018 dollars (the nominal number would be higher).

Even after taxes, given your current income and spending (and especially if you pay off a mortgage in the next 30 years), that puts you on track for a secure retirement.

Tl;dr: if you have extra room in your budget, by all means increase your TSP contributions. But if money is tight, then just stay the course. You are doing OK. As you get raises, make sure to increase your retirement contributions with each pay increase.

OP here. Thank you for this. This makes sense to me. If we max out our TSP and Roth IRA we would be saving, with the match, 36% of our HHI. I have never seen any financial adviser recommend saving 36% percent. Saving 36% plus the pension just seems completely ridiculous.

The way I have been thinking about it is that conservatively I think we can count on SS covering around 30% of our final salary and the pension another 25%. Figuring we can live on 75% of our final salary (which is pretty conservative given we want to move to a lower CoL area), then we will need our TSP to cover 20% of our final salary. Using the also conservative 4% draw down rule means we need to save 500% of our final salary. If our TSP contributions grow 3% faster than our salary increases (which seems very conservative), then with a 10% contribution (5%+ match), then we are there in 26 or 27 years.

Maybe we should bump our savings up to 15% or 20% of our HHI a year, but no way do we need to hit 36%.

I agree with this. Ignoring the pension just creates inaccurate results and skews the risk analysis. The FERS pension is not going away. The changes that have been made to it are for new employees, and they can't take away what you have already earned. It is deferred compensation that you have already contractually earned, for the federal government to renege on it would be a default just as much as refusing to pay Treasury bond holders, and if the government defaults, we will all be screwed generally and a higher TSP balance won't do much good.

Me too. Good analysis.

I agree they won't take FERS away completely but I don't see what prevents them from modifying it significantly even for current employees. There was a proposal last year to consider eliminating the COLA which would dramatically reduce the value of the pension. There was another proposal to change the computation to include the high 5. My question is what is to prevent them from, say, also changing the multiplier from 1% per year of service to say 0.5% per year of service? Changing to high 5 doesn't seem that much different than changing the pension multiplier insofar as both changes would have the effect of reducing the pension.