Q. I’m in FERS with about 15 years until I’m eligible for retirement. When I increase my TSP contribution, my taxable income is reduced and the amount of federal tax withheld is obviously reduced as well.
How would I go about calculating the “sweet spot” in my TSP contribution amount to get the most benefit in reference to the amount of taxes being withheld. Is there a law of diminishing returns here or is more always going to be better?
A. Sorry, but I’m not at all sure what you mean by “most benefit in reference to the amount of taxes being withheld.” If you mean to learn what TSP contribution amount will minimize the tax withholding from your paycheck, then, if all other factors are held constant, more is better.