Thread: How much in TSP to get 80% of High 3

Dooper, I'm CSRS withNOSS coming in the future. TSP is extra. I know this is not real advice, but I'll get a cardboard sign before I get back in the workforce. I'll be retiring Dec06 or May06 with 37+ years. Take care.:^

DMA wrote:

Bingo that will be the problem if you opt out of social security.

Great point Greg!!!!!!!!!!!!!!!

How can you opt out if you do not know when you are going to die, what the tax rate will be in the future and what will inflation do to your savings???

You have this great private account. However the private account will not have a COLA index. Think about it? People retired in 1970 on 100K. What is 100K getting you in 2005? What will 2005 money get you in 2035? Maybe a park bench if you are lucky.

Point 1: I'd opt out immediately (then I'd actually have ownership of the account, much like my Roth and TSP). An uncertain future is a fact of life. As long as I'm in the social security system, I am totally at the whim of Congressional(in)action. They can vote to cut benefits at any time, they can change how they are indexed, they can change the retirement age...at least withthe general tax rate, I only have one thing to worry about rather than worrying about how they'll change the programandwhether or not they'll raise income taxes. I'll just save and invest as much as I can while I'm working and figure that'll keep me adequately covered regardless of what happens down the road. The gist of what I have read in columns written by investment advice-givers for the local newspapers is that one *generally* assumes that s/he will take home less money in retirement - and therefore will be in the same (or lower) tax bracket (it is unlikely that Congress would be stupid enough to jack up the income tax rate to 70% on middle class wage earners, since this group constitutes a huge swath of the electorate). They also recommend taking full advantage of both tax deferred IRA's and Roths. For many people (myself included), maxing out the contribution to a tax deferred account is the best way to lower tax liability when one does not qualify for the litany of itemized deductions and has to settle for the standard.

Point 2 regarding 1970 retirement and the absence ofa COLA: well, that might have something to do with the fact that $100k in 1970 had about $500k in purchasing power using today's money. A person can retiresomewhat comfortably onhalf a million bucks. Source: http://eh.net/hmit/ppowerusd/

As for the COLA, the idea is that the private account would not require one due to the historical return of the market trumping that of Social Security by a wide margin.

Well Dooper, you have our attention. What do you say? D

41 yrs, 9 mos. to be exact........

I hope to retire in seven years as a CSRS employee. Yes, I will be getting roughly 2% a year for 35 years of service. Add what I hope will be about a years worth of sick leave, making it 36 years. But, I have not received any matching TSP contribution. I also have been limited as to what percentage I had been allowed to contribute. That said, with no SS to rely I hope to have 72% of my high three with my meager TSP fund.

If you examine net retirement pay and compare with your current take-home pay you would be surprised! I retired last year as a CSRS annuitant with 36 years service and nine months of sick leave. This equated to 69.6% of my average high three. When I compared the net pay of my retirement annuity and my final salary net pay, the annuity net was about 76% of my final salary net, without subtracting the TSP contributions of 10% from my final salary. When I factored in the TSP contributions into my salary, my retirement annuity net pay was 85% of my final salary net pay.

In retirement, I’ am not contributing to TSP (10%), CSRS Fund (7%), SS Medicare (1.45%), and my federal and state taxes went from 23.5% of salary to 19% of annuity. I even added into my final salary the benefit of having a non-taxable federal health insurance premium ($510/yr) and medical flexible savings account of $1,500 (+$506/yr).

All these figures do not take into account any withdrawal from my TSP account. If I were to withdraw 5% of balance yearly, this would add another 10% of net income to my net annuity yielding 86% of final salary net without subtraction the TSP contributions from salary.