Can Federal Employees Contribute to Both an IRA and the TSP?

Federal employees are allowed to contribute to an IRA in addition to the TSP. Here are the contribution limits for 2021.

A question that federal employees often ask us is whether or not they can contribute to an IRA in addition to their TSP accounts.

The short answer is yes! Here are some more details on contributing to both types of retirement savings accounts.

Contributing to an Individual Retirement Account (IRA) Outside of the Thrift Savings Plan (TSP)

The TSP notes, “Your participation in the TSP does not affect your eligibility to contribute to an IRA. However, the Internal Revenue Code (IRC) establishes limits on the dollar amount that you can contribute to eligible employer plans like the TSP and to individual retirement accounts such as traditional IRAs and Roth IRAs. These limits may change from year to year.”

Once your household income reaches a certain threshold, you may not be able to deduct IRA contributions. The IRS has more details about this on its website.

The TSP also adds in its FAQs on IRAs, “You should also be aware that depending on your personal financial situation, contributing to the Roth TSP may affect your eligibility to contribute to a Roth IRA.”

More information on Roth IRA contribution limits and eligibility follows below.

2021 TSP Contribution Limits

The annual contribution limit for the TSP is $19,500 per year in 2021. Federal employees who are over the age of 50 are also eligible to make catch-up contributions which amount to an additional $6,500 per year ($26,000 per year in total for those 50 and older in other words).

2021 IRA Contribution Limits

The annual contribution limit for an IRA in 2021 is $6,000 per year. The additional catch-up contribution limit for individuals 50 and over is $1,000.

All of this means that federal employees are eligible to contribute $25,500 total between an IRA and the TSP and as much as $33,000 if they are 50 or older.

Other Important Factors

If you plan on contributing to a Roth IRA, be aware that there are different eligibility rules for Roth IRAs that could come into play based on one’s annual income. If an individual makes over a certain amount of money each year, he or she may have limited or no eligibility to contribute to a Roth IRA.

2021 Income Limits for Roth IRA Contributions

This table from the IRS breaks down the Roth IRA contribution limits for the various filing statuses:

If your filing status is… And your modified AGI is… Then you can contribute…
married filing jointly or qualifying widow(er)

 < $198,000

 up to the limit

 > $198,000 but < $208,000

 a reduced amount

 >  $208,000

 zero

married filing separately and you lived with your spouse at any time during the year

 < $10,000

 a reduced amount

 > $10,000

 zero

single, head of household, or married filing separately and you did not live with your spouse at any time during the year

 < $125,000

 up to the limit

 > $125,000 but < $140,000

 a reduced amount

 > $140,000

 zero

The details surrounding Roth IRA contribution limits are explained further on the IRS website. A qualified tax advisor can guide you in determining if you are eligible to contribute to a Roth IRA based on your personal financial situation.

Conclusion

If you can afford to set aside more money for retirement and are eligible to do so, do it! You’ll appreciate having done so when you reach retirement.

The information above is a basic overview of guidelines for retirement contributions. Depending on one’s financial situation or the type of investment, it can quickly become more complex. You should always consult with a qualified tax professional and/or financial planner for advice and assistance tailored to your personal situation.

About the Author

Ian Smith is one of the co-founders of FedSmith.com. He enjoys writing about current topics that affect the federal workforce.