A question that federal employees sometimes have is whether or not they can contribute to both an IRA and the TSP.
The answer is yes, they can contribute to both! There are some caveats, however. Here are some additional details on contributing to both types of retirement savings accounts.
Contributing to an IRA Outside of the Thrift Savings Plan (TSP)
The TSP states, “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, and a tax advisor can help you to make this determination for your household.
The TSP also adds, “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.”
So what are these contribution limits for the TSP and IRAs for 2024?
2024 TSP Contribution Limits
The 2024 annual contribution limit for the TSP is $23,000 per year, an increase of 2.2% over the 2023 annual limit, so it represents a great savings opportunity for federal employees who can afford to contribute the maximum annual amount to their TSP accounts.
Federal employees over the age of 50 are also eligible to make catch-up contributions which amount to an additional $7,500 per year. This puts the total annual savings limit at $30,500 for federal employees aged 50 and over based on the 2024 TSP contribution limits set by the IRS.
2024 IRA Contribution Limits
The 2024 IRA annual contribution limit is $7,000 per year, up from $6,500 per year in 2023. The additional catch-up contribution limit for individuals 50 and over is $1,000 ($8,000 total).
Total 2024 Annual Retirement Contribution Opportunity
Between the 2024 TSP and the IRA contribution limits, federal employees can potentially save as much as $30,000 per year in the two account types. For those who can afford to invest this much into retirement, it will go a long way towards growing into millions of dollars by the time they are retirement age.
Federal employees who are age 50 and older have an even better total annual savings opportunity thanks to the catch-up contributions. Between the TSP and an IRA, it is $38,500 in 2024.
Other Important Factors
Federal employees who plan on contributing to a Roth IRA must be aware that different eligibility rules for Roth IRAs could come into play based on their annual incomes. 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.
2024 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) | < $230,000 | up to the limit |
| married filing jointly or qualifying widow(er) | > $230,000 but < $240,000 | a reduced amount |
| married filing jointly or qualifying widow(er) | > $240,000 | zero |
| married filing separately and you lived with your spouse at any time during the year | < $10,000 | a reduced amount |
| married filing separately and you lived with your spouse at any time during the year | > $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 | < $146,000 | up to the limit |
| single, head of household, or married filing separately and you did not live with your spouse at any time during the year | > $146,000 but < $161,000 | a reduced amount |
| single, head of household, or married filing separately and you did not live with your spouse at any time during the year | > $161,000 | zero |
A qualified tax advisor can guide you in determining if you are eligible to contribute to a Roth IRA based on your financial situation.
Conclusion
If you can afford to set aside more money for retirement and are eligible to do so, do it! It is a move you won’t regret when you retire.
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 situation.
