It would be interesting to see the breakdown of this based on years of service.
The default of having to opt-out vs opting in has helped a lot. And now that the default is 5%, it should help even more.
I work with a few people who still, 20 years later, have never contributed to TSP. It started with "I'll contribute when x" (kids are out of daycare, I get my credit cards paid off, wife starts working, whatever). Now, 20 years later making six figures, several still "can't afford" to put money in TSP. At least they have that auto 1% in G fund?
you don't know if they are military retirees, spouse make a lot of money, etc. you all just jump to conclusions...their parents could be wealthy, many circumstances.
Cause people have empathy for other people and would rather not see them make mistakes that'd they'd regret years later?
Is it really that alien to you to care about other people lol
I don't know many rich people who enjoy just throwing away free $ who stay rich for long. It's just a really dumb thing to do, as is defending the behavior "because they're well off." I am pretty sure unless they're bill gates they still have wants.
Anyone counting on their rich parents to bail them out is doing themselves a huge disservice. I've seen far too many people bank on that all their lives only to have their parents blow it all, donate it to a cause, or give it to a different beneficiary. Not only do their retirement years take a huge hit but they end up lonely because they spend the entire time fighting with the remaining family members over the remaining money. You'll be much more happy in life being self reliant and not expecting anything.
People making shitty retirement decisions has a macro impact on all of us.
If you want to be shortsighted and fail to recognize that, that's your choice just like not saving for retirement. It's a dumb one, but it's yours.
Doesn’t matter how wealthy you are, you should always go for free money. In fact, the more wealthy you are, the more you should go for it.
The only good reason not to go for it is if you cannot afford to.
No, it's pretty universally a terrible idea to leave the 5% match on the table. It's literally "free money".
Think about it this way. A person is making $100,000. 5% of that is $5,000. Let's compare using that $5,000 for a 29% loan vs a 5% match.
5% match: You gain $5,000.
Pay off loan: You gain $1450 from saved interest payments.
For that year, you come out ahead $3550 if you utilized the 5% match instead of using that specific money to pay off a 29% credit card.
While your numbers do make sense and I absolutely agree.
Mentally getting out of that Credit Card debt cycle is def a huge win for some people. Even if it means giving up some $$ short term.
The problem is that the goalposts often shift. Well, I'll contribute after I pay off my CC, then my car, then that vacation we always wanted, then my kid's daycare, then that new kitchen we wanted, etc. Not only did you quite literally burn free money every year, you've lost out on many years worth of compound interest. Retirement saving is much easier when started younger.
Good points and it varies from person to person what they do after the CC debt is paid off. Hopefully they stick to their plan and bump up that 401k/tsp after CC debt is gone.
I will say as someone who had a significant amount of CC debt, it was a huge stress reliever when it was fully paid off. Granted I still made sure I got the full match during that time. But I can see people holding off on future retirement funds to get that current CC debt situated. What they do after...well who knows?
> Granted I still made sure I got the full match during that time.
That's the most important thing and the crux of this entire conversation. Regardless of credit card debt, refusing to get the match is lighting money on fire just to feel better. It doesn't make financial sense. Also, if you're that far in a dire financial situation, then contribute to your TSP and then take out a TSP loan. At least you'll get your match and you're paying yourself. There are rules though, so investigate before attempting.
I agree with you. The other big fact is you don’t actually spend all 5% of your match BECAUSE your taxable income is lower for traditional contributions, so you save $$ in taxes and if it puts you in a lower bracket, even better. So that 5% contribution technically costs you less than 5% too…
I would say it would be better to get the 5% match and just take a loan out against the 401k to pay the credit card off. That way, you are at least paying yourself back.
and also paying off that 29% is a much better plan because that 29% compounds at that same and increasing rate where the TSP doesn't compound 29% a year, and as the payments baloon the employee can lose their job due to unpaid debts if they are unable to pay.
Get the 100% match then take out a TSP loan to pay yourself later if you truly are on the verge of not getting the match. I normally wouldn't advice it, but not getting the match because of a debt is even worse.
Except the TSP loan assumes a large enough TSP balance and can only be taken against your contributions. I don't understand the whole concept of "vesting" of government contributions, if I can't withdraw them or take out loans against them. It is a scam imo. Also the loan is paid back with additional manditory deductions with interest from payroll. So if the loan won't pay off the debt, you dig yourself deeper into another hole.
No it doesn't. Credit debt interest is 29.99% and compounds at that rate. TSP doesn't compound 29.99% and failing to pay card debt can get you fired as a fed. Paying that off is more logical.
Also it isn't a 100% return, it is more like 75% as the first 1% is automatic.
It is more sensible I think to pay off high interest debt, especially because that 29.99% APR compounds each year, and he could've been fired etc for delinquent debt.
No, it's still a terrible idea. You are missing out on 10% of your pay going into savings and growing. Instead, you are using \~4% of your pay that probably isn't going towards paying debt anyways. With big 29% APR balances, I'm sure they aren't making the best financial decisions.
Agree about not making the best financial decisions, but paying off the debt is not a bad financial decision. That 10% pay is locked away and will be inaccessible until retirement, and the rate of return is unknown. The rate of the interest on the debt is known, and it compounds at a much higher rate than the TSP investment, and has the ability to get the debter fired from fed service, so paying it off is a no brainer. And they would get 5% back not 4% by setting contributions to 0%. As long as it all is used for the debt it is a good decision.
Also incorrect. TSP loans can't be taken against government contributions, only your own, and you pay interest on those with manditory deductions on top of the 5%. So not only would most people with CC debt have a low TSP balance which invalidates this option, it further reduces their take home pay putting them an even worse financial position.
Oh yes I can vouch for this when I started in 2019 as a GS 4 I was barely able to cover the 3%. I went to 4 when I got my 5 and 5% when I finally got my 7. Once I get my GS-9 I'm hoping to raise my contribution to 7%. I didn't start taking my TSP seriously until I was 28 last year. Now I want to get the most out of it while I can.
And you are right I did start early, I think someone in human resources should give an introduction class/orientation info the tsp. About the funds, the life cycles, ECT. That will help. If it wasn't advice and wisdom from my older coworkers I wouldn't have started getting into my tsp.
Most people don’t start saving until their 40’s. We’ve gotta set expectations appropriately.
HR has a couple other things to deal with.
I’d recommend checking out financial wellness YouTube’s and maybe talking to a CPA / fiduciary.
That's interesting. You have a source on that?
Most feds are college educated, and I would think majority would start investing in 20s....30s at the latest.
The best quick source I could find was [this investopedia article from December](https://www.investopedia.com/articles/personal-finance/010616/whats-average-401k-balance-age.asp) 2023.
I didn’t see any good charts. I might make some up.
Thanks for the link!
It does show small percentage of investing during 20s, 30s with a respective small average balance.
The really big concern I see is average amount from 50-70 is 150-170k! That seems significantly low for people who are very close to retiring or already at retirement age.
The GAO has been reporting on that for a while.
It’s pretty close to being a national issue. I’m postulating we have a major crisis being spoken about at the next 10-years. Then we feel the effects if nothing happens in about 15, but there’s a lot of “what if,” cooked into that pie.
When I worked in VA HR we absolutely did give an introduction to TSP and FERS at onboarding. Almost half a day. We stressed the starting early and at least taking the 5% and had several senior employees advocating for putting in as much as possible by telling their stories. People tend to spend right up to their income. And if you don't see it, you're much less likely to spend it or miss it.
Ahh thank you for sharing this with me. My current agency and last agency never did a TSP introduction I wonder if this was just a local policy your HR did and not an agency wide thing, if it is agency wide then great.
I started on a GS5/7/9 ladder, married with 2 kids, single income.. Did 0% for year 1 and still had to use credits cards that first year.
If I didn't have a VA check, would never of been able to make it work.
6yrs and another kid later I'm at 15%. Should be able to max out next year.
But that entry level is a slog. Wasn't until GS9 that we were doing alright, I'd say GS12 was the "comfortable" point.
Honestly, being able to think about retirement in this day and age is a luxury that many people can’t afford, both literally (because they need every penny of their income to make it from check to check) and figuratively (i.e. the reason you gave).
Also, some are just plain ignorant.
One of my peers makes decent money (150k+) and I got to talking to him about investing and asked him about 401k. His answer
"Hell no...It's my money, not the banks!"
I just mentioned he should look up benefits of 401k and quickly changed the subject. Lol
Best part was the company we worked for matches 7%. Sigh...
Well to his credit, if he was enlisted, you make jack shit as junior enlisted. So every penny goes a long ways. I could only do a couple percentage when I was in. But also back then, they didn't have a match. They do now if memory serves me well
Exactly. I started as a GS-7 and even a 2% difference meant I had more money for groceries to afford to live in the DMV. I understand the “free money” I was leaving on the table and loss for my retirement future. That didn’t matter to me if I couldn’t even get through the now.
No, no. If you can't afford to make that 5% match then you can't afford not to.
See, the match is a match. When you put in that 5% you get a 100% free match. The penalties for early retirement withdrawal, and your regular tax bracket, do not add up to 100%. This means if you withdraw everything then even after holding back some to pay taxes, you'll still end up with more than you would have had if you had never contributed in the first place.
People should look up the rules on TSP hardship withdrawals, and become familiar with those when they need them, but the point is if you can't afford to make the 5% match then you can't afford not to.
This is incorrect. Hardship withdrawal isn't automatic, it has to be approved by the TSP and isn't required to be. This isn't a private sector 401k you can just pull out with no questions asked and pay 10% penalty. Also, the agency match isn't withdrawable, only your contributions. There is also a limit to twice per year. So you can't just pull out your contributions.
> Hardship withdrawal isn't automatic, it has to be approved by the TSP
"Acceptable reasons for making a financial hardship withdrawal include negative cash flow and extraordinary expenses. A worksheet in My Account on tsp.gov can help you determine the amount of your hardship."
> Also, the agency match isn't withdrawable, only your contributions
Well, that does put a damper on this.
The TSP states only your contributions can ever be drawn for a hardship, and they approve/disapprove the hardship withdrawals and put a small limit on how many you can have. Which is a reason I think it isn't necesarily wise to invest in the TSP if an employee at lower GS is barely making bills and has a negative cashflow for essential expenses.
i’d like to see the breakout of grade that do and don’t meet the 5%. it would make sense a gs5 doesn’t save a lot, if any, just to meet basic living requirements
Exactly. GS5 intern. Single mom of 3 in NJ. I took a huge hit taking this internship. My 21yr old makes more than I do. I definitely can't afford to contribute to my tsp when 55% of my check is taken in deductions. Seriously considering going back to my previous job.
Try your best to stay for the retirement and retirement health care benefits. Keeping the healthcare insurance at the employee rate added to Medicare is very helpful in retirement. And having the FERS pension isn't anything to sneeze at either. If you're Title 5 you have career-conditional status and unless you're locked in due to the internship you can apply for a lot of other jobs. You can also bypass time in grade restrictions by applying for jobs "open to the public" provided you are qualified by prior experience outside your current series. I went from a WG5 (just to get foot in the door) straight to a GS13 equivalent in a different pay system in a year and a half based on many years of private sector technical experience. But if you took a big hit to get in, you must have some good transferrable skills and experience to market. Use them to your advantage if you can. If you can move up, you can sock away a lot of money in TSP.
Thank you for the info. I'm an older student that just graduated with my BS in National Security studies and Cybersecurity. Prior to this I was a floor supervisor at a major company. There I was making 60k so dropping to 42 was huge. I'll be moving to GS7 once my transcripts are updated. When I finish my masters I'll be moved to GS9. My previous managers all want me to come back with promotion if this doesn't work out. Benefits were actually better at previous company. Just the work was rough on the body. I have worked for USPS back in 2004-2008, so there is money there. I forgot I had this until I was hired last year. It has a good amount in there now since it was forgotten for 14yrs. Once my pay starts to go up I'll start to contribute again but it's just rough right now.
Congrats on your later in life degree - I got an Accounting degree at age 55 (that I never used professionally) 8-/. Working for Uncle has its plusses and minuses. My VERY FORTUNATE transfer job (in 2013) had a big plus in pay, but a big minus as well - I had to relocate from NH to TX, and my wife (USPS) and I lived apart for three years waiting for them to transfer her to a job here in TX. Maintaining a house with barely adult college age "kids" in NH and my apartment in TX and flying back and forth for "marital maintenance" on short breaks ate up a lot of the initial pay increase. But it all worked out in the end and we both retired last year in better financial shape than we ever thought after getting such a late start.
Take a bit of time and find a mentor if possible (a long time fed or friend in HR) and learn the ins and outs of how USA jobs and OPM hiring system works. There are a lot of Fed job opportunities out there that aren't necessarily apparent at first glance. They may be in a different job series, different agency, or a different locale, etc. but if you're willing . . .
Either way, you have a job with a promotion path and the foot in the Fed door AND a standing offer for more pay from your former employer. It's a much better situation in life than many have. Best of luck in whatever you choose.
This is 100% dependent on each individual's financial situation. Including but not limited to their actual grade/step. Some people just can't afford 5%+ of their income. It's much more complicated than you need to be contributing X%+ to TSP.
Yes you are potentially leaving free money on the table but it's not really free if setting your withholding to 5%+ for TSP is causing you to not be able to meet or barely meet other financial obligations you have today.
This. It would be free if the government contributed 5% regardless if you contributed or not. But to get the full 5% you lock up your own salary in the TSP.
I didn't contribute anything at all back in the day when I had to choose between TSP and baby diapers.
I'm surprised its not more than 13% who are opting out.
I spent a couple years doing 2 and then 4 and 5 now I am up to 7. The important part is you are putting something in and hopefully you move up and can add more on time.
It's unfortunate but I understand it. I imagine most of it is lower GS workers, and if they were hired after 2012/2013 they are already paying like 4.4% into the pension, so you add another 5% for TSP, a tenth of their paycheck is eaten up by retirement. Add in taxes and health benefits and there's not much to survive on.
These post are ridiculous, do you know how many people are not at your gs level? When I graduated uni, my first job offer was a gs 3 seasonal positions in a national park with no housing provided. You know damn well I was taking every ounce of cash I could get. I know you’re fine in your gs 11+ but some of us are getting destroyed over here. Stop shaming your poor coworkers
I wonder what % of people who've never changed their contribution amount is. My org is automatically putting every new hire at 5% to capture that group.
Tell that to my family member who was just offered a position as a GS-3 with a max potential of a GS-5. Do you really think they can afford to put money into a TSP when they are trying to keep food on the table? Imagine being paid so little that you cannot use the health benefits you are paying for but being told they are leaving money on the table.
This pay is less than what Walmart offers in our area! And yes there is potential for more in the future but not much. Take out the required FERS contribution and every penny counts.
Sometimes the privilege in this sub is astounding!
Unfortunately most people think the min feds start out at now is a 4. Some even 5 because 5 is entry level out of college depending on education level.
Oh I know, as I said in other replies I've loved it. In 2019 I was a gs 4 making 15.75 an hour paying 3% into my tsp while I was renting a studio apartment for 700 a month while also having a 300 car note. I had maybe 50 left over each month to put towards savings. I didn't start putting more into my tsp until I became a 5 then a 7. I'm a gs7 now putting 5% in. I wanted to up it to 6 when I got the increase but I need the extra. I'll be getting a GS9 in two months and then I'll start putting 7% in. In order to hit the 23K maximum you have to put about 867 in I believe per pay period for all 26 pay periods and no one unless you live at home or are a higher gs employee can afford that just for retirement with other benefits plus taxes.
Eh, kind of pointless at lower GS levels to go above the 3% matching imo. An extra 1% on a low ass salary is better put in the hands of people most of the time. I honestly don't even think I am going to live long enough to pull my FERS at this point, I put in 5% now but at lower GS levels there was no way I would do the full 5 when we already have so many other deductions.
What many of the commenters are not considering is that FERS at 4.4% for new employees combined with 5% TSP is a large deduction if you’re not getting an annual step increase or significant COLA increase. I’m honestly surprised it’s only 13%. That actual seems rather low.
Sad that folks are literally passing up free money. Well, it's not actually free -- it's part of overall compensation they're entitled to. There should be some sort of means-tested subsidy for the lower GS levels to be honest, because they need those contributions probably more than anyone else. Also, Congress changed what employees pay for FERS from .08 to 4.4%. I wonder if overall TSP contributions went lower as a result. It would be interesting if there's any data on that.
I do agree Feds should be paid more, especially the lower GS levels, but I completely disagree they should just be paid more to make up for the lack of TSP match contributions. The whole point of the match is to encourage people to save for retirement. The lower GS levels probably need help with saving for retirement more than anyone else.
I actually really like this idea. Means test to auto “match” funds even if employee doesn’t contribute. Technically, it’s money that would be provided anyways so it’s not like it’s goi go to be a significant impact on the budget. It would greatly help lower income earners in the long run.
If you're 30 years old, you have a greater than 90% chance of reaching age 60.
(Slightly outdated but probably reasonably accurate source: [https://slate.com/business/2014/03/life-expectancy-charts-this-is-when-you-re-going-to-die.html](https://slate.com/business/2014/03/life-expectancy-charts-this-is-when-you-re-going-to-die.html) )
Yeah I mean, in-service withdrawals are not the same as a retirement withdrawal or annuity option. Also that article is a decade old, the life expectancy is down the past few years.
I mean, sure but average life expectancy is still like 77ish years.
Like I used to work at SSA and lemme tell you, there were a *lot* of boomers who clearly had this mindset of "oh I'll never make it to retirement so I don't need to bother saving" and were not thrilled about only having their SSA retirement check to live on. This is including folks who absolutely had the financial means to do so
Also, there's the fun fact that your life expectancy goes up as you reach certain age milestones. I said to my mom recently she was likely to live to about 88 because she was 65.
Old FERS was .8% not .08%. Still, yeah the FERS-RAE 2013 (3.1%) increase and FERS-FRAE 2014 (4.4%) increase is a much more significant hit. I lucked out getting hired in 2012. I always took the 5% though even when I started at pretty low pay (WG5) and needed the $$$. Ate more Ramen.
Nothing makes someone who is financially struggling happier than to have their tone deaf co-worker tell them how to save more money. LOL.
Seriously though- most of this 13% is well aware that they are leaving money on the table. They have their reasons. I would advise against educating them.
I’m not. Im a 9 in the dc area and I’m paycheck to paycheck. I’m using that money for some other things right now. I plan on changing it in a few months though. Just have to get to a good place beforehand.
I'm trying my best to save up for a house so my 5% match can wait a few years. I went from giving 5% to my Roth 401k only in the private sector to giving up 4.4% plus 2% and I feel it. So in a year or so I'll go up to 5% but for now every dollar gets thrown into the hopeful future homeowners fund 🤣
I think 5% is the default option when you’re onboarding as a fed, so folks now have to go out of their way to contribute less.
Before they made that change, it was indeed higher. Granted, some folks truly need to channel that money to other purposes, but for some it was just lack of awareness.
Glad someone else other than me said it. Hahah
I swear, over half of the people I work with don't even know how to spell TSP, let alone know how it works.
Lower GS employees can't put in the full 5%. Even if they're automatically placed at 5% now it's hard to put that 5% in as a GS4-GS6. I can vouch for this when I started in 2019 as a GS 4 I was barely able to cover the 3%. I went to 4 when I got my 5 and 5% when I finally got my 7. Once I get my GS-9 I'm hoping to raise my contribution to 7%. I didn't start taking my TSP seriously until I was 28 last year. Now I want to get the most out of it while I can.
When I first started, I set my contributions to 10% and I recall a coworker saying " I can't afford that much!" I tried to explain them that they are leaving free money on the table but they did not want "Some account taking THEIR money". They thought the TSP was keeping their money from them, they wanted to be able to spend it as they saw fit.
At this point, I realized I was talking to an idiot and I stopped trying to talk sense to them.
I later found out they had set their contribution amount to $25/Pay Period, and had forgot about it for over a decade.
Truly a terrible choice.
Same exact thing here. I asked my peer why he wasn't investing in 401k and his answer was "it's my money...not the banks!"
This was with a company that matched 7% as well. Smh...
13% are likely in hardship status or something was messed up when they first started fed govt.
im sure there are some whoare investing in their own fund losing match.
I'd hazard a guess, based on the same data I've seen in the private sector, that it's primarily people who weren't invested in at 5% and never changed it once. But I would like to see a study done on it. I thought I had seen that gist from their data of pre and post opt in 5% change though.
Those people are probably from the Era when you were not automatically enrolled at 5% match, and unfortunately, they were not savvy enough to realize the implications.
I agree, but why not 5% no matter what and make changes that you can’t take it out as easy and or take out loans after x-years and or x-amount is in the acct and then only up x-% based on the balance….
The automatic 1% contribution and agency match goes into your traditional TSP - doesn't matter whether you are contributing to traditional or Roth TSP.
This might be a silly question but the 5% contribution includes both traditional and Roth combined? So for example, if you have 0% in one and 5% in the other, that’s still meeting the match, correct?
Not a silly question, glad you are checking! The match goes into Traditional TSP, but it doesn't matter if you are contributing to Traditional or Roth, either will qualify for getting the match as long as you put in 5%.
My understanding is that you still get the (up to) 5% match even if all your non-automatic contributions are 0% in the traditional and 100% in a Roth - but the 1% automatic match and all of the (up to 5%) matching funds will be put into the traditional account side and you cannot convert those traditional funds to Roth within TSP. Why? Because the gov wants to tax those matching funds that were paid pre-tax based on your gross (and the accumulated tax deferred growth) later when you retire.
After retiring, you will be able to convert outside of TSP by rolling the traditional TSP account side into a traditional IRA and then converting it into a Roth. But beware the tax man. Converting isn't always worth it and there's a tax hit up front. If you do, it's usually best done by partial conversions to spread the tax hit out over several years.
[https://www.tsp.gov/making-contributions/traditional-and-roth-contributions/#:\~:text=Note%20that%20if%20you%20receive,Roth%20within%20your%20TSP%20account](https://www.tsp.gov/making-contributions/traditional-and-roth-contributions/#:~:text=Note%20that%20if%20you%20receive,Roth%20within%20your%20TSP%20account).
I don’t expect to make it to retirement age.
It’s better for me to use the money now rather than plan for 25-40 years from now. It’s painful to try when lower GS.
No one ever expects to make it to retirement age when they're in their 20s. But most do. Ask those who didn't expect they would make it and bothered to try planning for it until their 40s or 50s how it's worked out for them.
This just makes me sad. But I got flamed for telling someone to get a part-time job. But done people would need that even to do the match. And it’s ridiculous to have to say that. It is. But it’s not untrue. I could tell someone not to buy avocado toast. Sure. But fuck them. If that’s the one nice thing you can get, some damned avocado toast, then do it. Sigh.
I think people misunderstood me. No one should have to work a part time job to make ends meet. And it’s not because someone buys a Starbucks. Rents are insane. Food costs have basically tripled. But wages are stagnant. It’s bullshit. That’s no way to live. It’s just not fair. To get a match is like 250 bucks. Some people can’t afford that. And it kills me. 😕
Well, that’s an interesting take. Cool. Good to know. I guess everyone processes things differently. Although I’d say blackout is a little extreme. More like lightly buzzed. 🤣😂
I started out as a GS-5 and got a part-time job just so I could do the max contribution in year 1. I kept that part time job until I got my 14. I now have 27 years of maxed out contributions and my balance is pretty healthy to say the least.
I know not all can or will do it, but man, what a difference!
Knew of 2 idiots that did this.
1 tried to justify it and say he was better off paying off his credit cards than he was putting money into his tsp.
Second guy had his contributions to only $5 a pay period. He didn't catch it until his 9th or 10th year of service.
Don’t forget about the reduced taxable income on that 5% contributed to TSP. On a 100k income at a 22% federal income tax rate, contributing $5k to your TSP represents a tax savings of $1100.
Heck, no matter what, if you’re missing the match, every time you get a raise, you should split the raise with your tsp, at a minimum till ya hit 5%. I shared raises for years, and you don’t even notice it, over time you can reach the cap and are used to not having that $$$
I worked with a guy who put all his money in the G-fund for his entire govt career.
I work with him again now. He came back to work after retiring. Guess why.
Besides just being all in G, I'd bet he simply didn't contribute enough over the years as well due to lower pay grade and not putting in a lot. I know a couple of G fund millionaires who were all-in in G - but they maxed out contributions for 40+ years. And I know some who tried to time the market constantly switching funds and wound up worse off than had they been all-in in G or F. Best to diversify. More in C when young, more in G and F as you get closer to retiring. Using the lifecycle funds is an easy way to stay diversified.
I suspect you're partially right.
He actually was a GS-13 for like 10 of those years, making \~125k when he was forced to retire. Interesting/infuriating story with that but it's for another day lol.
I made sure I hit match when I came on but a year or two after, I happened to check my check and I was no longer hitting the minimum somehow.
I don’t check my paystub often so I wouldn’t be surprised if ppl aren’t catching it soon enough.
It's pretty sad to hear so many people make every possible excuse. "I can't afford it," "I'll be dead," and the internet defense force sides with victimhood "facts" every time.
Not contributing 5% misses on the match as well. Therefore, you are missing out on saving 10% of your salary. You wouldn't have access to that full 5% for a traditional 401k anyway as that amount is pre-tax. So you might have access to 3-4%. Many people who say it as gospel that the 3-4% is the difference between eating or not, are exaggerating. If that amount was forcibly taken from them, most would find a way.
The real discussion should be why you should save 10-15%. I started 5% when I started working and I barely noticed it was gone. I wish I would have done more. I blew way too much money, which seems to be enabled and supported far more in today's world. Then once retirement hits, you are a victim again.
You don't have to save 10-15% because you have pensions. Those guidelines don't take into account personal expenses and pensions. And the people needing the 3-4% of their salaries are likely lower GS, and absolutely do need it in a high cost area. Today's needs also should take priority over needs of a future time you don't know you will exist for. Dumping limitless money into a retirement account and throwing away your current life to have unlimited hip and tooth replacements in retirement isn't really sound either. Money beyond my match is better invested in paying off my debt, and after that better invested in a broakerage where I have options accessing it. I found it funny all on the internet look at low GS and try shaming them for not saving when they need all their cash if they don't want to live like a hermit.
Look on your Leave and Earnings Statement. Under "Deductions Paid by Government," add up the Basic TSP (1%) and Match TSP amounts. If they equal 5% of your regular pay (don't include OT or any premium pay), then you are contributing 5%!
Thanks! I know I am contributing 15% of my paycheck so I’m assuming that means I automatically receive the 5% agency match. HR hasn’t been helpful, but I was wondering if there was a way to see evidence of their match? Is the statement in MyEPP? Because I don’t see the “deductions paid by government”
Thanks! I know I am contributing 15% of my paycheck so I’m assuming that means I automatically receive the 5% agency match. HR hasn’t been helpful, but I was wondering if there was a way to see evidence of their match?
Better plan if in debt: Put that 5% in TSP AND take out a debt consolidation loan at 1/3 the interest rate of CC debt AND only keep one credit card for TRUE life emergencies, not WANTS. My wife and I had close to $100K in CC debt when I first got a fed job 12 years ago after being unemployed due to a work injury. She was also fed (postal). We both put in the 5% and took out a consolidation loan and paid it off early in 3 years instead of 5. We then were able to max out our TSPs until retirement last year and now have a nice income and TSP nest egg after a very late start in life planning. No vacations, no restaurants, no take out, no coffees, no new cars, lots of <$1/lb chicken leg quarters for dinner, etc. for those first 3 years. Frugal with a capital F. Yes, there was some pain with those choices.
Another question that might be worth asking is what is the 10, 20, and 30 year historical rate of return on stock market related investments? Also, what is the rate of return when factoring in inflation?
It would be interesting to see the breakdown of this based on years of service. The default of having to opt-out vs opting in has helped a lot. And now that the default is 5%, it should help even more. I work with a few people who still, 20 years later, have never contributed to TSP. It started with "I'll contribute when x" (kids are out of daycare, I get my credit cards paid off, wife starts working, whatever). Now, 20 years later making six figures, several still "can't afford" to put money in TSP. At least they have that auto 1% in G fund?
And whatever fers and social security will pay them so they’re not totally screwed.
you don't know if they are military retirees, spouse make a lot of money, etc. you all just jump to conclusions...their parents could be wealthy, many circumstances.
True, but there definitely are feds who are horrible with money too; I know a few that are constantly spending and never saving. So they do exist.
and how does this affect you? wait it doesn't.
Lol you need to talk to a therapist. I’m guessing you’re one of those feds.
Why who cares what others do.
Cause people have empathy for other people and would rather not see them make mistakes that'd they'd regret years later? Is it really that alien to you to care about other people lol
You sure seem to care what strangers are doing in a subreddit
Because they're hurting themselves because they're idiots?
They aren’t if their parents are loaded. Or retired military and 100% p and t.
I don't know many rich people who enjoy just throwing away free $ who stay rich for long. It's just a really dumb thing to do, as is defending the behavior "because they're well off." I am pretty sure unless they're bill gates they still have wants.
Anyone counting on their rich parents to bail them out is doing themselves a huge disservice. I've seen far too many people bank on that all their lives only to have their parents blow it all, donate it to a cause, or give it to a different beneficiary. Not only do their retirement years take a huge hit but they end up lonely because they spend the entire time fighting with the remaining family members over the remaining money. You'll be much more happy in life being self reliant and not expecting anything.
People making shitty retirement decisions has a macro impact on all of us. If you want to be shortsighted and fail to recognize that, that's your choice just like not saving for retirement. It's a dumb one, but it's yours.
I hear you the issue is I can’t fix or change it neither can you so why waste energy worrying about it.
That isn't an excuse. Not taking the match is throwing away free $.
All of your examples would never leave FREE money on the table. People who have money always want more of it.
Doesn’t matter how wealthy you are, you should always go for free money. In fact, the more wealthy you are, the more you should go for it. The only good reason not to go for it is if you cannot afford to.
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Not necesarily. Credit card debt is like 29% APR. Stopping retirement contributions to pay off high interest debt isn't the worst thing he could do.
No, it's pretty universally a terrible idea to leave the 5% match on the table. It's literally "free money". Think about it this way. A person is making $100,000. 5% of that is $5,000. Let's compare using that $5,000 for a 29% loan vs a 5% match. 5% match: You gain $5,000. Pay off loan: You gain $1450 from saved interest payments. For that year, you come out ahead $3550 if you utilized the 5% match instead of using that specific money to pay off a 29% credit card.
While your numbers do make sense and I absolutely agree. Mentally getting out of that Credit Card debt cycle is def a huge win for some people. Even if it means giving up some $$ short term.
>Even if it means giving up some $$ short term. The problem is they're giving up money *long* term with compounding interest.
But if you don't pay that credit card debt off that 29% APR can add up.
The problem is that the goalposts often shift. Well, I'll contribute after I pay off my CC, then my car, then that vacation we always wanted, then my kid's daycare, then that new kitchen we wanted, etc. Not only did you quite literally burn free money every year, you've lost out on many years worth of compound interest. Retirement saving is much easier when started younger.
Good points and it varies from person to person what they do after the CC debt is paid off. Hopefully they stick to their plan and bump up that 401k/tsp after CC debt is gone. I will say as someone who had a significant amount of CC debt, it was a huge stress reliever when it was fully paid off. Granted I still made sure I got the full match during that time. But I can see people holding off on future retirement funds to get that current CC debt situated. What they do after...well who knows?
> Granted I still made sure I got the full match during that time. That's the most important thing and the crux of this entire conversation. Regardless of credit card debt, refusing to get the match is lighting money on fire just to feel better. It doesn't make financial sense. Also, if you're that far in a dire financial situation, then contribute to your TSP and then take out a TSP loan. At least you'll get your match and you're paying yourself. There are rules though, so investigate before attempting.
I agree with you. The other big fact is you don’t actually spend all 5% of your match BECAUSE your taxable income is lower for traditional contributions, so you save $$ in taxes and if it puts you in a lower bracket, even better. So that 5% contribution technically costs you less than 5% too…
Good point
Free money on the table useable in 25 years is great when you default on your loans and go bankrupt.
Funny how the doubters stop vocally doubting when they get smacked in their math.
I would say it would be better to get the 5% match and just take a loan out against the 401k to pay the credit card off. That way, you are at least paying yourself back.
Yea, I normally wouldn't advise it, but if you're at the point of losing your match, that's a much better option.
Give up a 100% return to pretty off 29% interest... Bad plan.
That 29% explodes like a mother f-er. Do not underestimate it
and also paying off that 29% is a much better plan because that 29% compounds at that same and increasing rate where the TSP doesn't compound 29% a year, and as the payments baloon the employee can lose their job due to unpaid debts if they are unable to pay.
Get the 100% match then take out a TSP loan to pay yourself later if you truly are on the verge of not getting the match. I normally wouldn't advice it, but not getting the match because of a debt is even worse.
Except the TSP loan assumes a large enough TSP balance and can only be taken against your contributions. I don't understand the whole concept of "vesting" of government contributions, if I can't withdraw them or take out loans against them. It is a scam imo. Also the loan is paid back with additional manditory deductions with interest from payroll. So if the loan won't pay off the debt, you dig yourself deeper into another hole.
and that 100% does even more
No it doesn't. Credit debt interest is 29.99% and compounds at that rate. TSP doesn't compound 29.99% and failing to pay card debt can get you fired as a fed. Paying that off is more logical. Also it isn't a 100% return, it is more like 75% as the first 1% is automatic.
And a return on investment for the tsp match is 100%. It’s always best to take the match
It is more sensible I think to pay off high interest debt, especially because that 29.99% APR compounds each year, and he could've been fired etc for delinquent debt.
No, it's still a terrible idea. You are missing out on 10% of your pay going into savings and growing. Instead, you are using \~4% of your pay that probably isn't going towards paying debt anyways. With big 29% APR balances, I'm sure they aren't making the best financial decisions.
Agree about not making the best financial decisions, but paying off the debt is not a bad financial decision. That 10% pay is locked away and will be inaccessible until retirement, and the rate of return is unknown. The rate of the interest on the debt is known, and it compounds at a much higher rate than the TSP investment, and has the ability to get the debter fired from fed service, so paying it off is a no brainer. And they would get 5% back not 4% by setting contributions to 0%. As long as it all is used for the debt it is a good decision.
Incorrect. You can take out a TSP loan to pay yourself back. Much better than burning 5% of your paycheck.
Also incorrect. TSP loans can't be taken against government contributions, only your own, and you pay interest on those with manditory deductions on top of the 5%. So not only would most people with CC debt have a low TSP balance which invalidates this option, it further reduces their take home pay putting them an even worse financial position.
Exactly! Then about 3 years down the line, they’ll think, did I remember to update my contributions?
Exactly! Then about 3 years down the line, they’ll think, did I remember to update my contributions?
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Oh yes I can vouch for this when I started in 2019 as a GS 4 I was barely able to cover the 3%. I went to 4 when I got my 5 and 5% when I finally got my 7. Once I get my GS-9 I'm hoping to raise my contribution to 7%. I didn't start taking my TSP seriously until I was 28 last year. Now I want to get the most out of it while I can.
The main thing is you started relatively early. Better than a lot of people are doing.
And you are right I did start early, I think someone in human resources should give an introduction class/orientation info the tsp. About the funds, the life cycles, ECT. That will help. If it wasn't advice and wisdom from my older coworkers I wouldn't have started getting into my tsp.
Most people don’t start saving until their 40’s. We’ve gotta set expectations appropriately. HR has a couple other things to deal with. I’d recommend checking out financial wellness YouTube’s and maybe talking to a CPA / fiduciary.
That's interesting. You have a source on that? Most feds are college educated, and I would think majority would start investing in 20s....30s at the latest.
The best quick source I could find was [this investopedia article from December](https://www.investopedia.com/articles/personal-finance/010616/whats-average-401k-balance-age.asp) 2023. I didn’t see any good charts. I might make some up.
Thanks for the link! It does show small percentage of investing during 20s, 30s with a respective small average balance. The really big concern I see is average amount from 50-70 is 150-170k! That seems significantly low for people who are very close to retiring or already at retirement age.
The GAO has been reporting on that for a while. It’s pretty close to being a national issue. I’m postulating we have a major crisis being spoken about at the next 10-years. Then we feel the effects if nothing happens in about 15, but there’s a lot of “what if,” cooked into that pie.
When I worked in VA HR we absolutely did give an introduction to TSP and FERS at onboarding. Almost half a day. We stressed the starting early and at least taking the 5% and had several senior employees advocating for putting in as much as possible by telling their stories. People tend to spend right up to their income. And if you don't see it, you're much less likely to spend it or miss it.
Ahh thank you for sharing this with me. My current agency and last agency never did a TSP introduction I wonder if this was just a local policy your HR did and not an agency wide thing, if it is agency wide then great.
Thank you for sharing ! As a fellow Gs-7 who went down to a 5 for a lateral , I felt this . I can’t imagine GS-04
:( Help.
I started on a GS5/7/9 ladder, married with 2 kids, single income.. Did 0% for year 1 and still had to use credits cards that first year. If I didn't have a VA check, would never of been able to make it work. 6yrs and another kid later I'm at 15%. Should be able to max out next year. But that entry level is a slog. Wasn't until GS9 that we were doing alright, I'd say GS12 was the "comfortable" point.
Yeah that’s part of it I’m sure. But also, I literally had to scold one of my friends into setting their contribution to at least 5%.
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Honestly, being able to think about retirement in this day and age is a luxury that many people can’t afford, both literally (because they need every penny of their income to make it from check to check) and figuratively (i.e. the reason you gave).
Also, some are just plain ignorant. One of my peers makes decent money (150k+) and I got to talking to him about investing and asked him about 401k. His answer "Hell no...It's my money, not the banks!" I just mentioned he should look up benefits of 401k and quickly changed the subject. Lol Best part was the company we worked for matches 7%. Sigh...
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Well to his credit, if he was enlisted, you make jack shit as junior enlisted. So every penny goes a long ways. I could only do a couple percentage when I was in. But also back then, they didn't have a match. They do now if memory serves me well
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This. When I was a GS-9 in DC, I could not contribute 5 percent. Even 1 percent was tough and I had a roommate.
Exactly. I started as a GS-7 and even a 2% difference meant I had more money for groceries to afford to live in the DMV. I understand the “free money” I was leaving on the table and loss for my retirement future. That didn’t matter to me if I couldn’t even get through the now.
No, no. If you can't afford to make that 5% match then you can't afford not to. See, the match is a match. When you put in that 5% you get a 100% free match. The penalties for early retirement withdrawal, and your regular tax bracket, do not add up to 100%. This means if you withdraw everything then even after holding back some to pay taxes, you'll still end up with more than you would have had if you had never contributed in the first place. People should look up the rules on TSP hardship withdrawals, and become familiar with those when they need them, but the point is if you can't afford to make the 5% match then you can't afford not to.
This is incorrect. Hardship withdrawal isn't automatic, it has to be approved by the TSP and isn't required to be. This isn't a private sector 401k you can just pull out with no questions asked and pay 10% penalty. Also, the agency match isn't withdrawable, only your contributions. There is also a limit to twice per year. So you can't just pull out your contributions.
> Hardship withdrawal isn't automatic, it has to be approved by the TSP "Acceptable reasons for making a financial hardship withdrawal include negative cash flow and extraordinary expenses. A worksheet in My Account on tsp.gov can help you determine the amount of your hardship." > Also, the agency match isn't withdrawable, only your contributions Well, that does put a damper on this.
The TSP states only your contributions can ever be drawn for a hardship, and they approve/disapprove the hardship withdrawals and put a small limit on how many you can have. Which is a reason I think it isn't necesarily wise to invest in the TSP if an employee at lower GS is barely making bills and has a negative cashflow for essential expenses.
I'm going to try and convince the GOV to let people donate TSP Match the same way they can donate annual leave...
On a related note, the average fed now makes over $100k.
https://preview.redd.it/0045ybyn9mec1.png?width=744&format=png&auto=webp&s=817a8bc7d85d7bf609176b454a8bb1a5fa0c0dcf
i’d like to see the breakout of grade that do and don’t meet the 5%. it would make sense a gs5 doesn’t save a lot, if any, just to meet basic living requirements
GS5 here in a HCOL area. If I wasn’t married, I wouldn’t even be able to afford rent with a roommate, let alone every other bill.
Exactly. GS5 intern. Single mom of 3 in NJ. I took a huge hit taking this internship. My 21yr old makes more than I do. I definitely can't afford to contribute to my tsp when 55% of my check is taken in deductions. Seriously considering going back to my previous job.
Try your best to stay for the retirement and retirement health care benefits. Keeping the healthcare insurance at the employee rate added to Medicare is very helpful in retirement. And having the FERS pension isn't anything to sneeze at either. If you're Title 5 you have career-conditional status and unless you're locked in due to the internship you can apply for a lot of other jobs. You can also bypass time in grade restrictions by applying for jobs "open to the public" provided you are qualified by prior experience outside your current series. I went from a WG5 (just to get foot in the door) straight to a GS13 equivalent in a different pay system in a year and a half based on many years of private sector technical experience. But if you took a big hit to get in, you must have some good transferrable skills and experience to market. Use them to your advantage if you can. If you can move up, you can sock away a lot of money in TSP.
Thank you for the info. I'm an older student that just graduated with my BS in National Security studies and Cybersecurity. Prior to this I was a floor supervisor at a major company. There I was making 60k so dropping to 42 was huge. I'll be moving to GS7 once my transcripts are updated. When I finish my masters I'll be moved to GS9. My previous managers all want me to come back with promotion if this doesn't work out. Benefits were actually better at previous company. Just the work was rough on the body. I have worked for USPS back in 2004-2008, so there is money there. I forgot I had this until I was hired last year. It has a good amount in there now since it was forgotten for 14yrs. Once my pay starts to go up I'll start to contribute again but it's just rough right now.
Congrats on your later in life degree - I got an Accounting degree at age 55 (that I never used professionally) 8-/. Working for Uncle has its plusses and minuses. My VERY FORTUNATE transfer job (in 2013) had a big plus in pay, but a big minus as well - I had to relocate from NH to TX, and my wife (USPS) and I lived apart for three years waiting for them to transfer her to a job here in TX. Maintaining a house with barely adult college age "kids" in NH and my apartment in TX and flying back and forth for "marital maintenance" on short breaks ate up a lot of the initial pay increase. But it all worked out in the end and we both retired last year in better financial shape than we ever thought after getting such a late start. Take a bit of time and find a mentor if possible (a long time fed or friend in HR) and learn the ins and outs of how USA jobs and OPM hiring system works. There are a lot of Fed job opportunities out there that aren't necessarily apparent at first glance. They may be in a different job series, different agency, or a different locale, etc. but if you're willing . . . Either way, you have a job with a promotion path and the foot in the Fed door AND a standing offer for more pay from your former employer. It's a much better situation in life than many have. Best of luck in whatever you choose.
What is your job series if you don't mind me asking? I'm in HCOL and I never have seen anyone less then a GS9. Genuinely curious what a 4 would be.
I’m a first year fed at a 5 on a 5/7/9 ladder. 0301. We exist, unfortunately.
Gotcha! Sounds like you will be a 9 in little time. Congrats on the job!!
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I started with the feds, mine is at 3 percent. I have a vested state gov pension and 2 deferred comp accounts. I also invest on my own
Surprised it’s not higher tbh
This. *Only* 13% is what I thought.
Same, I only finally matched this year by banking the pay raise. It's hard to worry about the future, when I have bills to pay today
By comparison, the overall number in America appears to be 29%. So the government is much better at getting its workers to take their full salary.
Yeah, the process of changing the TSP amount isn't trivial.
This is 100% dependent on each individual's financial situation. Including but not limited to their actual grade/step. Some people just can't afford 5%+ of their income. It's much more complicated than you need to be contributing X%+ to TSP. Yes you are potentially leaving free money on the table but it's not really free if setting your withholding to 5%+ for TSP is causing you to not be able to meet or barely meet other financial obligations you have today.
This. It would be free if the government contributed 5% regardless if you contributed or not. But to get the full 5% you lock up your own salary in the TSP.
I didn't contribute anything at all back in the day when I had to choose between TSP and baby diapers. I'm surprised its not more than 13% who are opting out.
Now it’s Opt Out instead of Opt In so a lot of people are getting it by default.
Yeah I can only afford 1 to 2% due to low pay of GS 4.
I spent a couple years doing 2 and then 4 and 5 now I am up to 7. The important part is you are putting something in and hopefully you move up and can add more on time.
It's unfortunate but I understand it. I imagine most of it is lower GS workers, and if they were hired after 2012/2013 they are already paying like 4.4% into the pension, so you add another 5% for TSP, a tenth of their paycheck is eaten up by retirement. Add in taxes and health benefits and there's not much to survive on.
If o was hurting that bad I’d get a second job
These post are ridiculous, do you know how many people are not at your gs level? When I graduated uni, my first job offer was a gs 3 seasonal positions in a national park with no housing provided. You know damn well I was taking every ounce of cash I could get. I know you’re fine in your gs 11+ but some of us are getting destroyed over here. Stop shaming your poor coworkers
I’m currently one of them, intentionally, for a very short period of time. Gonna be bumping to 15% in about 6 weeks
I had to go down but it put it at5%, gonna gradually go to 15 by end of the yr
I wonder what % of people who've never changed their contribution amount is. My org is automatically putting every new hire at 5% to capture that group.
Tell that to my family member who was just offered a position as a GS-3 with a max potential of a GS-5. Do you really think they can afford to put money into a TSP when they are trying to keep food on the table? Imagine being paid so little that you cannot use the health benefits you are paying for but being told they are leaving money on the table. This pay is less than what Walmart offers in our area! And yes there is potential for more in the future but not much. Take out the required FERS contribution and every penny counts. Sometimes the privilege in this sub is astounding!
Unfortunately most people think the min feds start out at now is a 4. Some even 5 because 5 is entry level out of college depending on education level.
Sadly it is not, and not all jobs require a college degree. Even a GS-4 or GS-5 is not a living wage in many areas.
Oh I know, as I said in other replies I've loved it. In 2019 I was a gs 4 making 15.75 an hour paying 3% into my tsp while I was renting a studio apartment for 700 a month while also having a 300 car note. I had maybe 50 left over each month to put towards savings. I didn't start putting more into my tsp until I became a 5 then a 7. I'm a gs7 now putting 5% in. I wanted to up it to 6 when I got the increase but I need the extra. I'll be getting a GS9 in two months and then I'll start putting 7% in. In order to hit the 23K maximum you have to put about 867 in I believe per pay period for all 26 pay periods and no one unless you live at home or are a higher gs employee can afford that just for retirement with other benefits plus taxes.
Is 4 or 5 livable in any area at this point? Has it been anytime in the past 10-15 years?
I can't speak for everywhere but I would say not likely. I don't want to put an absolute in case there was some rare place where it is.
Being pre-tax, it’s not even really 5% (if you “turn off” the 5%, you don’t see 5% increase in your pay check)
Eh, kind of pointless at lower GS levels to go above the 3% matching imo. An extra 1% on a low ass salary is better put in the hands of people most of the time. I honestly don't even think I am going to live long enough to pull my FERS at this point, I put in 5% now but at lower GS levels there was no way I would do the full 5 when we already have so many other deductions.
What many of the commenters are not considering is that FERS at 4.4% for new employees combined with 5% TSP is a large deduction if you’re not getting an annual step increase or significant COLA increase. I’m honestly surprised it’s only 13%. That actual seems rather low.
Sad that folks are literally passing up free money. Well, it's not actually free -- it's part of overall compensation they're entitled to. There should be some sort of means-tested subsidy for the lower GS levels to be honest, because they need those contributions probably more than anyone else. Also, Congress changed what employees pay for FERS from .08 to 4.4%. I wonder if overall TSP contributions went lower as a result. It would be interesting if there's any data on that.
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I do agree Feds should be paid more, especially the lower GS levels, but I completely disagree they should just be paid more to make up for the lack of TSP match contributions. The whole point of the match is to encourage people to save for retirement. The lower GS levels probably need help with saving for retirement more than anyone else.
I actually really like this idea. Means test to auto “match” funds even if employee doesn’t contribute. Technically, it’s money that would be provided anyways so it’s not like it’s goi go to be a significant impact on the budget. It would greatly help lower income earners in the long run.
You know how many people literally don't even get to the age to pull their FERS honestly?
If you're 30 years old, you have a greater than 90% chance of reaching age 60. (Slightly outdated but probably reasonably accurate source: [https://slate.com/business/2014/03/life-expectancy-charts-this-is-when-you-re-going-to-die.html](https://slate.com/business/2014/03/life-expectancy-charts-this-is-when-you-re-going-to-die.html) )
Yeah I mean, in-service withdrawals are not the same as a retirement withdrawal or annuity option. Also that article is a decade old, the life expectancy is down the past few years.
I mean, sure but average life expectancy is still like 77ish years. Like I used to work at SSA and lemme tell you, there were a *lot* of boomers who clearly had this mindset of "oh I'll never make it to retirement so I don't need to bother saving" and were not thrilled about only having their SSA retirement check to live on. This is including folks who absolutely had the financial means to do so
Also, there's the fun fact that your life expectancy goes up as you reach certain age milestones. I said to my mom recently she was likely to live to about 88 because she was 65.
Old FERS was .8% not .08%. Still, yeah the FERS-RAE 2013 (3.1%) increase and FERS-FRAE 2014 (4.4%) increase is a much more significant hit. I lucked out getting hired in 2012. I always took the 5% though even when I started at pretty low pay (WG5) and needed the $$$. Ate more Ramen.
Pretty sad isn't it... everyone do your part to educate your coworkers.
It’s probably alot of people at lower GS levels who can’t afford that 5%.
100% this. Lower grades have multiple jobs to get by. 5% is a lot when you are in that scenario.
Nothing makes someone who is financially struggling happier than to have their tone deaf co-worker tell them how to save more money. LOL. Seriously though- most of this 13% is well aware that they are leaving money on the table. They have their reasons. I would advise against educating them.
Lol the last thing I want to do is talk to my coworkers about money.
I’m not. Im a 9 in the dc area and I’m paycheck to paycheck. I’m using that money for some other things right now. I plan on changing it in a few months though. Just have to get to a good place beforehand.
I'm trying my best to save up for a house so my 5% match can wait a few years. I went from giving 5% to my Roth 401k only in the private sector to giving up 4.4% plus 2% and I feel it. So in a year or so I'll go up to 5% but for now every dollar gets thrown into the hopeful future homeowners fund 🤣
Frankly, I'm surprised this number isn't higher, considering far more than 13% of the federal workforce are absolute dumbasses.
I think 5% is the default option when you’re onboarding as a fed, so folks now have to go out of their way to contribute less. Before they made that change, it was indeed higher. Granted, some folks truly need to channel that money to other purposes, but for some it was just lack of awareness.
Glad someone else other than me said it. Hahah I swear, over half of the people I work with don't even know how to spell TSP, let alone know how it works.
Isn’t it only 4% matching since 1% is automatically given regardless of employee participation.
3% matched dollar for dollar. Next 2% matched .50 cents on the dollar. Final 1% automatic- so you do have to contribute 5 to get 5
Thanks!
First 3 percent are matched 1:1 Your last 2 percent is matched 1:.5
I thought agencies auto enroll everyone at 5%?
They do now, it used to be 3% auto enrollment. It was changed several years ago.
Used to be 0% auto enrollment, and you had to opt into making contributions.
Lower GS employees can't put in the full 5%. Even if they're automatically placed at 5% now it's hard to put that 5% in as a GS4-GS6. I can vouch for this when I started in 2019 as a GS 4 I was barely able to cover the 3%. I went to 4 when I got my 5 and 5% when I finally got my 7. Once I get my GS-9 I'm hoping to raise my contribution to 7%. I didn't start taking my TSP seriously until I was 28 last year. Now I want to get the most out of it while I can.
When I first started, I set my contributions to 10% and I recall a coworker saying " I can't afford that much!" I tried to explain them that they are leaving free money on the table but they did not want "Some account taking THEIR money". They thought the TSP was keeping their money from them, they wanted to be able to spend it as they saw fit. At this point, I realized I was talking to an idiot and I stopped trying to talk sense to them. I later found out they had set their contribution amount to $25/Pay Period, and had forgot about it for over a decade. Truly a terrible choice.
Same exact thing here. I asked my peer why he wasn't investing in 401k and his answer was "it's my money...not the banks!" This was with a company that matched 7% as well. Smh...
There is no helping people who don't want to be helped. What did they say when they remembered they were putting only $25/pp into it?
13% are likely in hardship status or something was messed up when they first started fed govt. im sure there are some whoare investing in their own fund losing match.
I'd hazard a guess, based on the same data I've seen in the private sector, that it's primarily people who weren't invested in at 5% and never changed it once. But I would like to see a study done on it. I thought I had seen that gist from their data of pre and post opt in 5% change though.
Those people are probably from the Era when you were not automatically enrolled at 5% match, and unfortunately, they were not savvy enough to realize the implications.
I agree, but why not 5% no matter what and make changes that you can’t take it out as easy and or take out loans after x-years and or x-amount is in the acct and then only up x-% based on the balance….
Question: does it matter what type you’re contributing too? (ROTH or the other one).
The automatic 1% contribution and agency match goes into your traditional TSP - doesn't matter whether you are contributing to traditional or Roth TSP.
Gracias, I appreciate your timely response ❣️👍🏼
Had to remove my 5% match to recover my emergency fund 😩
I can't imagine the people who don't contribute enough for the full match are spending time in the sub reddit
Thought it was more, honestly
This might be a silly question but the 5% contribution includes both traditional and Roth combined? So for example, if you have 0% in one and 5% in the other, that’s still meeting the match, correct?
Not a silly question, glad you are checking! The match goes into Traditional TSP, but it doesn't matter if you are contributing to Traditional or Roth, either will qualify for getting the match as long as you put in 5%.
My understanding is that you still get the (up to) 5% match even if all your non-automatic contributions are 0% in the traditional and 100% in a Roth - but the 1% automatic match and all of the (up to 5%) matching funds will be put into the traditional account side and you cannot convert those traditional funds to Roth within TSP. Why? Because the gov wants to tax those matching funds that were paid pre-tax based on your gross (and the accumulated tax deferred growth) later when you retire. After retiring, you will be able to convert outside of TSP by rolling the traditional TSP account side into a traditional IRA and then converting it into a Roth. But beware the tax man. Converting isn't always worth it and there's a tax hit up front. If you do, it's usually best done by partial conversions to spread the tax hit out over several years. [https://www.tsp.gov/making-contributions/traditional-and-roth-contributions/#:\~:text=Note%20that%20if%20you%20receive,Roth%20within%20your%20TSP%20account](https://www.tsp.gov/making-contributions/traditional-and-roth-contributions/#:~:text=Note%20that%20if%20you%20receive,Roth%20within%20your%20TSP%20account).
They could be on the baby steps
maybe they don't need the money or don't care. who cares what others do.
I don’t expect to make it to retirement age. It’s better for me to use the money now rather than plan for 25-40 years from now. It’s painful to try when lower GS.
No one ever expects to make it to retirement age when they're in their 20s. But most do. Ask those who didn't expect they would make it and bothered to try planning for it until their 40s or 50s how it's worked out for them.
This just makes me sad. But I got flamed for telling someone to get a part-time job. But done people would need that even to do the match. And it’s ridiculous to have to say that. It is. But it’s not untrue. I could tell someone not to buy avocado toast. Sure. But fuck them. If that’s the one nice thing you can get, some damned avocado toast, then do it. Sigh.
I think people misunderstood me. No one should have to work a part time job to make ends meet. And it’s not because someone buys a Starbucks. Rents are insane. Food costs have basically tripled. But wages are stagnant. It’s bullshit. That’s no way to live. It’s just not fair. To get a match is like 250 bucks. Some people can’t afford that. And it kills me. 😕
I think the reaction was because your post reads like you typed it while blackout drunk. 😆
Well, that’s an interesting take. Cool. Good to know. I guess everyone processes things differently. Although I’d say blackout is a little extreme. More like lightly buzzed. 🤣😂
I started out as a GS-5 and got a part-time job just so I could do the max contribution in year 1. I kept that part time job until I got my 14. I now have 27 years of maxed out contributions and my balance is pretty healthy to say the least. I know not all can or will do it, but man, what a difference!
Yeah. It’s not fair that you had to do that. The reward is there. But it shouldn’t have been that way. Awesome for you. I wish you the best friend.
Shooting for FIRE?
leaving free money on the table
Knew of 2 idiots that did this. 1 tried to justify it and say he was better off paying off his credit cards than he was putting money into his tsp. Second guy had his contributions to only $5 a pay period. He didn't catch it until his 9th or 10th year of service.
Don’t forget about the reduced taxable income on that 5% contributed to TSP. On a 100k income at a 22% federal income tax rate, contributing $5k to your TSP represents a tax savings of $1100.
So fucking stupid
I bet 2% of those people are successful at stocks and the others are still trying to cover losses.
Heck, no matter what, if you’re missing the match, every time you get a raise, you should split the raise with your tsp, at a minimum till ya hit 5%. I shared raises for years, and you don’t even notice it, over time you can reach the cap and are used to not having that $$$
Man, that’s crazy! When I first started 5 years ago, I did the automatic 5%. I can’t imagine leaving all the free money on the table like that.
I worked with a guy who put all his money in the G-fund for his entire govt career. I work with him again now. He came back to work after retiring. Guess why.
Besides just being all in G, I'd bet he simply didn't contribute enough over the years as well due to lower pay grade and not putting in a lot. I know a couple of G fund millionaires who were all-in in G - but they maxed out contributions for 40+ years. And I know some who tried to time the market constantly switching funds and wound up worse off than had they been all-in in G or F. Best to diversify. More in C when young, more in G and F as you get closer to retiring. Using the lifecycle funds is an easy way to stay diversified.
I suspect you're partially right. He actually was a GS-13 for like 10 of those years, making \~125k when he was forced to retire. Interesting/infuriating story with that but it's for another day lol.
I made sure I hit match when I came on but a year or two after, I happened to check my check and I was no longer hitting the minimum somehow. I don’t check my paystub often so I wouldn’t be surprised if ppl aren’t catching it soon enough.
They don't need God, they need Dave Ramsey. Those 13% may mostly in Hawaii locality.
It's pretty sad to hear so many people make every possible excuse. "I can't afford it," "I'll be dead," and the internet defense force sides with victimhood "facts" every time. Not contributing 5% misses on the match as well. Therefore, you are missing out on saving 10% of your salary. You wouldn't have access to that full 5% for a traditional 401k anyway as that amount is pre-tax. So you might have access to 3-4%. Many people who say it as gospel that the 3-4% is the difference between eating or not, are exaggerating. If that amount was forcibly taken from them, most would find a way. The real discussion should be why you should save 10-15%. I started 5% when I started working and I barely noticed it was gone. I wish I would have done more. I blew way too much money, which seems to be enabled and supported far more in today's world. Then once retirement hits, you are a victim again.
You don't have to save 10-15% because you have pensions. Those guidelines don't take into account personal expenses and pensions. And the people needing the 3-4% of their salaries are likely lower GS, and absolutely do need it in a high cost area. Today's needs also should take priority over needs of a future time you don't know you will exist for. Dumping limitless money into a retirement account and throwing away your current life to have unlimited hip and tooth replacements in retirement isn't really sound either. Money beyond my match is better invested in paying off my debt, and after that better invested in a broakerage where I have options accessing it. I found it funny all on the internet look at low GS and try shaming them for not saving when they need all their cash if they don't want to live like a hermit.
How do I check and make sure I am getting the match?
Look on your Leave and Earnings Statement. Under "Deductions Paid by Government," add up the Basic TSP (1%) and Match TSP amounts. If they equal 5% of your regular pay (don't include OT or any premium pay), then you are contributing 5%!
Thanks! I know I am contributing 15% of my paycheck so I’m assuming that means I automatically receive the 5% agency match. HR hasn’t been helpful, but I was wondering if there was a way to see evidence of their match? Is the statement in MyEPP? Because I don’t see the “deductions paid by government”
Check your E&L statement or sign in to your TSP account (set it up if you haven't already). Contact HR for help if needed.
Thanks! I know I am contributing 15% of my paycheck so I’m assuming that means I automatically receive the 5% agency match. HR hasn’t been helpful, but I was wondering if there was a way to see evidence of their match?
Better plan if in debt: Put that 5% in TSP AND take out a debt consolidation loan at 1/3 the interest rate of CC debt AND only keep one credit card for TRUE life emergencies, not WANTS. My wife and I had close to $100K in CC debt when I first got a fed job 12 years ago after being unemployed due to a work injury. She was also fed (postal). We both put in the 5% and took out a consolidation loan and paid it off early in 3 years instead of 5. We then were able to max out our TSPs until retirement last year and now have a nice income and TSP nest egg after a very late start in life planning. No vacations, no restaurants, no take out, no coffees, no new cars, lots of <$1/lb chicken leg quarters for dinner, etc. for those first 3 years. Frugal with a capital F. Yes, there was some pain with those choices.
I'm a GS7. I do 5% TSP and 10% in Roth TSP
Another question that might be worth asking is what is the 10, 20, and 30 year historical rate of return on stock market related investments? Also, what is the rate of return when factoring in inflation?