2024 Will Witness More Roth Account Activity in the Thrift Savings Plan

Starting in 2024, catch-up contributions will have to be made in the Roth TSP for some federal employees.

Federal employees and others whose taxable income will exceed $145,000 in 2024 should be prepared to start thinking about how their catch-up contributions will be different. Participants in the Thrift Savings Plan (TSP), 401(k), and 403(b) plans will have to characterize the catch-up contributions in these plans as Roth contributions rather than pre-tax contributions. A TSP Bulletin has already been released for this change.

Under current law, individuals who have reached age 50 and older are permitted to make additional catch-up contributions to retirement accounts. Currently, the catch-up contribution is $7,500. This amount is indexed for inflation.

Starting in 2024, under SECURE 2.0, if a person has an income of at least $145,000 for that year, the catch-up contribution must be treated as a Roth contribution. As a result, of those contributions being made with after-tax dollars, those contributions will not reduce current income. The good news is that the Roth contributions and their earnings can be withdrawn tax-free in the future. The $145,000 income threshold will be indexed for inflation in future years. 

Beginning in 2025, a new special catch-up contribution is permitted for taxpayers who are between the ages of 60 and 63. That contribution limit will be equal to the greater of (1) $10,000 or (2) 150% of the standard catch-up contribution limit for 2024. The $10,000 limit will also be indexed for inflation. Once the taxpayer reaches age 64, the regular (lower) catch-up contribution limit applies.

If you are a federal employee and will be over the age of 50 next year and forecast your 2024 income to exceed $145,000, you may wish to consider opening a Roth TSP this year. You can start putting in a few dollars this year and have the Roth account up and running for next year’s catch-up contributions. 

By the way, the heirs other than the spouse of high-wage earners benefit from the Roth catch-up. Both Roth and traditional TSP, 401(k), and 403(b) accounts must be liquidated over 10 years by most non-spouse beneficiaries.

About the Author

Francis Xavier (FX) Bergmeister retired from the USMC and the F.B.I. Consider following him on LinkedIn as he shares articles from others about retirement and other financial topics. He also provides retirement seminars thru Federal Career Experts.