Q. My Aunt Bertha died and left me a tidy sum as an inheritance. Can I deposit this money in my Thrift Savings Plan account?
A. No you can’t. All TSP contributions must come from payroll deduction or from rollovers from qualified plans. A qualified plan would be a prior employer’s 401(k), either traditional or Roth, or pre-tax money in a traditional IRA. The inheritance you were left by Aunt Bertha is not a qualified plan.
However, here are a couple of things to think about.
- If you’re not contributing the maximum allowed to the TSP, you can increase your payroll deductions so that you reach the maximum at the end of the year and use some of Aunt Bertha’s inheritance to fill in the hole you created in your budget when you increased your TSP contributions. In 2017, the elective deferral amount is $18,000 and those 50 and over (including those that turn 50 this year) can contribute an additional $6,000 as a catch-up contribution. If your spouse has a qualified plan through their employer, they could do the same thing.
- If you are fully funding the TSP, you can contribute to an Individual Retirement Arrangement (IRA) as long as you have earned income. You could set up an IRA for your spouse as long as one of you has earned income. $5,500 is the maximum IRA contribution with a catch-up contribution (same age rules as above) of $1,000. Be sure to check IRS Publication 590-A before you contribute to an IRA, as there are income limits that restrict your ability to contribute to a Roth IRA, or to deduct your contributions to a traditional IRA.