THE "TOOLS" SECTION OF THE TSP. WHAT IT DOES AND WHAT IT DOES NOT DO!
The Tools section of the TSP website is very handy for users to calculate a variety of numbers related to your retirement. This was one of the first calculators I started using when I started trying to get estimates for my retirement. If you are thinking of retirement or trying to get started on retirement planning, I would seriously encourage you to start looking at this section and plugging in numbers.
You don't need any special skills or training to do this. Just try to play around with different numbers to see what your retirement estimates look like. The actual numbers are not the final product. The real objective is to get oriented to the different terms, financial issues and estimates that will get you more comfortable with the retirement planning process. It is a process and it takes a while to understand all the different moving pieces. It does not have to be too complex or overwhelming. If that is happening to you, then you need to slow down and take it one calculation at a time or get some help from someone more familiar with the retirement process.
Ideally, the earlier you start this the better. You don't want to be getting ready to retire and start using these calculators. This is for planning, creating retirement objectives and financial targets. That takes time and everybody needs time to digest this information. Not just because it involves a lot of numbers and calculations. It involves the rest of your new life after government service. That is a big emotional transition and you need time to figure things out for yourself and your family.
Some of the different calculations you can look at are:
How much should I save? (Ballpark Estimate)
How much will my savings grow?
How much can I contribute? (To my TSP)
Paycheck estimator? (To find out how the TSP contributions affect your paycheck)
Contribution comparison estimator? (For tax estimates between Roth TSP and Traditional TSP)
Retirement income calculator?
TSP monthly payment calculator?
Estimate loan payments? (From your TSP account)
You will be asked for basic information to fill in the required fields of data. Some of you may be familiar with this information and some of you may not. One of the big questions people struggle with is, "What is a realistic rate of return to use?" This was the topic of one of my earlier blogs on "Average Rate of the Stock Market for 100 years."
Many of the questions may prompt you to start thinking about your retirement in a more detailed way. There are questions about how much money you think you will need in retirement or when you expect to retire or your life expectancy. This could get you to start thinking about more specifics regarding the entire retirement process, especially if you need to coordinate this with your spouse and family or deciding on whether you will be working after retirement. This is something you will have to start thinking about eventually, so maybe now is the time to start getting these estimates more specific.
Now, what does the Tools section not do for you? The Tools is for estimates that get you started. You will have to do some more complex calculations to get closer to some of the retirement estimates you are looking for. One big area is, "How much can I take out of my TSP per month and how long will it last?" This is understandly a big issue for most of us and you need the most accurate information possible. It could determine whether you have an average retirement or a very comfortable retirement.
The Tools section can give you some useful estimates to see the difference between monthly payments of your TSP during retirement, such as a fixed level amount or a life expectancy amount (if you want the TSP to figure this out for you). You can also see what a TSP monthly payment would look like in a Joint Life with Spouse Annuity or Joint Life with other Survivor annuity. You can see all of this side by side and get an idea of how you might want your monthly payments calculated. Very cool information.
But if you want to see changes in rates of return, due to stock market fluctuations. If you need to change the amounts of your monthly payments due to changes in your personal life, which everyone experiences over 30 - 40 years. If you need to see different scenarios within one global scenario. If you need to incorporate the Required Minimum Distribution (RMD) amounts in your estimates and see what those amounts actually will look like when you turn age 70. Then the Tools section will not get you there. You need to look somewhere else for that.
That was one of the reasons I created TSPMASTERS. I realized when I started researching my retirement numbers, the Tools section was limited. I created my own spreadsheets with the formulas to do those multiple scenarios within the global scenario and to show what those RMD amounts look like. But I am not the only one with this information. Most financial planners or bank or insurance companies have some version of this process. If you look on the Internet, you can find a variety of services that use different calculators to find out most of the retirement calculations listed above but I am not sure if you can find the more complex calculators. Especially if you have never looked at those formulas. That could get a little overwhelming.
My advice is to try different calculator websites along with the Tools section of the TSP. Get a good understanding of the information the calculator is asking for, the types of data you will be looking at for retirement, and the different issues that will come up from getting this information. Take your time.
I seriously recommend looking at FERSGUIDE for retirement information. I listed FERSGUIDE on my website and I talk about why this could really help you. Looking at FERSGUIDE will get you to start gathering the financial terms and knowledge and thinking about other issues for retirement.
Once you get to that point, you will be ready to start fine tuning your retirement estimates. The process will get clearer to you and this will help you really look at yourself, your needs, your financial resources and what the next big phase of your post government life could look like.
Then you need to get the more complex and multi-scenario estimates. You need to talk to someone about that. You need the most accurate estimates possible. It's too big a transition in your life not to. Remember, this is for the rest of your life. You earned it!