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Can federal employees contribute to both
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an IRA and the TSP? Short answer is yes,
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they can. And in 2026, with the
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contribution limits having increased
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significantly over last year, it makes
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it even more appealing than ever. Let's
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take a look at how this works. Hi
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everyone, I'm Ian Smith with
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fedsmith.com. And we occasionally will
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see questions from federal employees
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uh asking about this topic. Can I
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contribute to an IRA outside of the
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Thrift Savings Plan? So, I think it's a
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fairly common misconception out there
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that that you can only do one or the
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other. And some of these misconceptions,
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they might look like if I max out my
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TSP, then I I can't contribute to an
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IRA. That's not true. Um, or if just
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participating in the TSP, that
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disqualifies me from participating in an
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IRA. That's also not true. It may affect
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tax deduction but not eligibility.
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One important disclaimer I wanted to
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mention up front, this can be a complex
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topic because of the tax implications
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and everybody's personal financial
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situation is different. So, it's very
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important to talk to a tax advisor and
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or a financial advisor for advice about
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your specific situation.
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As I said, the contribution limits for
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both an IRA and the TSP have increased
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in 2026. So, you can be saving a lot for
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retirement through both of these
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vehicles. I'll quickly go over these
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these new contribution limits for 2026.
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For the Thrift Savings Plan, the annual
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There's an additional $8,000 catch-up
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contribution amount if you're age 50 or
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over. And there's also a special
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catch-up contribution limit that
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recently became law that is $11,250
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in 2026. That's only for employees ages
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60 to 63. Now on the IRA side, the
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annual contribution limit in 2026 is
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The catchup contribution amount for
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individuals 50 and older is $1,100.
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So, if you fall in that age range, that
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would be a total of $8,600 in 2026 that
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you could contribute to an IRA. Again,
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it's important to note TSP and IRA
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contribution limits are completely
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separate. Maxing one out does not reduce
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the limit of the other. So, why would
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you want to contribute to both accounts?
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Well, as I said, it enables a lot more
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additional savings for retirement. So
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that means a lot more money going in on
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a regular basis that will compound and
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earn interest over a long period of time
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to then lead to greater wealth in
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retirement. Strengths of the TSP. Um
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it's got very low fees. It's a very
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simple diversified lineup. You've just
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got five core funds. Then of course
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there are the L funds. You also get a
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match to your agency. If you contribute
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at least a certain amount then the
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government will add a match on top of it
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and that's essentially free money. And
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you also have the opportunity for strong
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long-term compounding in the TSP as well
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over the course of your federal career.
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IRA, some of their strengths, uh, you
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get a lot more investment choices than
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you do inside of the TSP. This can be a
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blessing and a curse. It can be kind of
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overwhelming, especially if you don't do
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this stuff every day. It can be
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confusing, but a financial adviser can
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help you with it. And there are more
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simple options out there as well. If
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it's a Roth IRA, that offers tax-free
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withdrawals in retirement. And the money
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compounds tax free after you put it in.
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So that's a big big benefit. And a
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traditional IRA may offer uh tax
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deductions as well depending on your
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level of income. And if you combine the
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two investment accounts, that is a TSP
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and an IRA, that gives you tax
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diversification. And having both types
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of accounts would give you better
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flexibility in retirement withdrawal
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planning. As I mentioned, while you can
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contribute to both types of accounts,
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there are nuances in income limits that
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you have to consider. For a Roth IRA,
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for example, these are the income limits
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in 2026 that phase out eligibility to
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contribute to that type of account.
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These are from the IRS. Now, traditional
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IRA has its own phase out ranges as
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well, but those affect um ability to
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deduct traditional IRA contributions,
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but not your eligibility to contribute
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to one. Now, I know this is a complex
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topic and again that's why I stressed up
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front you really need to talk to a tax
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advisor andor a financial advisor for
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your situation and to understand all of
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the details about this. But the broader
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point is that you can contribute to both
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types of accounts. And if you're able
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to, it's good to do it because putting
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more money into retirement means you'll
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have that much more saved when you get
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to retirement. Using both the TSP and an
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IRA gives you more flexibility, more tax
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options, and more long-term compounding
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power. I hope this information was
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helpful. Please like and subscribe to
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the channel and consider sharing the
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video with others as well who who might
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find it helpful too. I've also included
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some links in the description to some
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other articles on the FedSmith website
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related to this topic that you may find
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helpful. So, thank you for watching.
