Page 55 - The Informed Fed--Hearn Wealth Management

entire balance is distributed to the beneficiaries and charged as income
for the year. This means that a surviving spouse may now be pushed into

the maximum tax bracket that year. Finally, many employees are
depending on their TSP as their only supplement to Social Security and
their pension. Virtually everyone who does this will be required to take a

pay cut in retirement. Even with the matching funds, 5% savings is not
enough to build a retirement income equal to their previous paycheck,

especially if those investments rise and fall with the market. While most
people know they should be saving more, very few do, and unmatched
funds in the TSP are subject to the disappointments of the low-return /

high-risk options.
Have you ever wondered how much you should put away for
retirement? The answer will vary according to individual needs in

retirement. Generally, if we start before age 30 and invest 10% of every
dollar we make until age 65, we will retire at an equal or better income
than we are accustomed to. If we wait until after age 30 to start saving,

we will need to put away 12-15% to reach that same goal. And if you are
over 40, you may need to put away 15% or more to build a comfortable

retirement income.

We are providing the following example courtesy of a federal

employee who shared his game plan with us. Every employee has unique

experience explains how he made the most of his TSP investments. He
stayed away from the C, S, I and Lifecycle funds to eliminate any

possibility of losing any of those hard-earned dollars. He was able to get
a predictable and positive return on the investment. This FERS

employee always contributed 5% to the Thrift Savings Plan. Since the
government matches his 5% with an additional 5%, he knows he has an
immediate 100% return on investment. He kept his funds allocated to

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