Q: A co-worker recently told me that I could contribute to both an Individual Retirement Account (IRA) and the Thrift Savings Plan (TSP). I thought there was a prohibition against contributing to both types of retirement account. Is what I was told by my co-worker true?
A: Yes it is, and you are not alone in thinking that you cannot fully fund both your TSP and an IRA. I’m not sure where that belief came from, but it’s persistent. I almost always have a few participants in each pre-retirement class I deliver for federal agencies who are laboring under this misconception. I recently updated an article I wrote for FedSmith to include 2015 and 2016 IRA contributions and limits.
If you can afford to contribute to both the TSP and an IRA, you should. In 2016 you can contribute $18,000 to the TSP and $5,500 to an IRA. If you are 50 or over (this includes the year in which you turn 50) you can contribute an additional $6,000 to the TSP and $1,000 to an IRA.
John Grobe’s latest book, The Answer Book on Your Federal Employee Benefits, has just been released by LRP Publications. Order your copy at shoplrp.com. Ask your human resources office to contact Federal Career Experts about pre-retirement training.