TSP contribution limits 2020

TSP contribution limits for 2020 is 19,500 per person. Additionally, all federal employees over the age of 50 can contribute a catch-up of $6,500 per year.

Retirement Calculator

What is TSP?

Thrift Saving Plan is a Federal retirement plan where both federal employees and agencies can make retirement contributions. Moreover, this retirement plan is one of the easiest and most effective ways for you to save for retirement. As a federal employee, you can make automatic contributions to your TSP directly through your employer’s payroll. You can choose the percentage of your salary that will go towards your retirement savings, Most TSP will provide you with multiple investment options in stocks and fixed income. Additionally, most agencies offer a TSP match up to a certain percentage. In most cases, you need to participate in the plan in order to get the match.

Who is Eligible to Participate in the TSP?

Most employees of the United States Government are eligible to participate in the Thrift Savings Plan. You are eligible if you are:

  • Federal Employees’ Retirement System (FERS) employees (started on or after January 1, 1984)
  • Civil Service Retirement System (CSRS) employees (started before January 1, 1984, and did not convert to FERS)
  • Members of the uniformed services (active duty or Ready Reserve)
  • Civilians in certain other categories of Government service

How much can I contribute to my TSP in 2020?

TSP contribution limits change every year. IRS typically increases the maximum annual limit with the cost of living adjustment and inflation. These contribution limits apply to all employees who participate in the federal government’s Thrift Savings Plan,  401(k), 403(b), and 457 plans. Additionally, the limits apply to both tax-deferred and Roth contributions combined. 

  • Employees can contribute up to $19,500 to their TSP plan for 2020,  $500 more than  2019.
  • Employees of age 50 or over are eligible for an additional catch-up contribution of $6,500 in 2020,  $500 higher than  2019
  • Employee compensation limit for calculating TSP contributions is $285,000, $5,000 more than 2019
  • For participants who contribute to both a civilian and a uniformed services TSP account during the year, the elective deferral and catch-up contribution limits apply to the combined amounts of traditional (tax-deferred) and Roth contributions in both accounts.
  • Members of the uniformed services, receiving tax-exempt pay (i.e., pay that is subject to the combat zone tax exclusion), your contributions from that pay will also be tax-exempt. Your total contributions from all types of pay must not exceed the combined limit of $57,000 per year.

There are two types of contributions – tax-deferred traditional TSP  and tax-exempt Roth TSP contributions.

Tax-deferred TSP

Most federal employees, typically, choose to make tax-deferred TSP contributions. These contributions are tax-deductible. They will lower your tax bill for the current tax year. Your investments will grow on a tax-deferred basis. Therefore, you will only owe federal and state taxes when you start withdrawing your savings.

Roth TSP

Roth TSP contributions are pretax. It means that you will pay all feral and state taxes before making your contributions. The advantage of Roth TSP is that your retirement savings will grow tax-free. As long as you keep your money until retirement, you will withdraw your gain tax-free. It’s a great alternative for young professionals and workers in a low tax bracket.

TSP Matching

Federal agencies can make a matching contribution up to the combined limit of $57,000 or $63,500 with the catch-up contribution. If you contribute the maximum allowed amount, your agency match cannot exceed $37,500 in 2020.

If you are an eligible FERS or BRS employee, you will receive matching contributions from your agency based on your regular employee contributions. Unlike most private companies, matching contributions are not subject to vesting requirements.

FERS or BRS participants receive matching contributions on the first 5% of your salary that you contribute each pay period. The first 3% of your contribution will receive a dollar-for-dollar match. The next 2% will be matched at 50 cents on the dollar. Contributions above 5% of your salary will not be matched.

Consider contributing at least 5% of your base salary to your TSP account so that you can receive the full amount of matching contributions.

Matching schedule

TSP Matching contribution
Source: tsp.gov

Opening your TSP account

FERS Employees

If you are a federal employee, hired after July 31, 2010, your agency has automatically enrolled you in the TSP.  By default, 3% of your base salary will be deducted from your paycheck each pay period and deposited in the traditional balance of your TSP account.  If you decide, you have to make an election to change or stop your contributions.

If you are a FERS employee who started before August 1, 2010, you already have a TSP account with accruing 1% automatic contributions. In addition, you can make contributions to your account from your pay and receive additional matching contributions.

 

CSRS Employees

If you are a Federal civilian employee who started before January 1, 1984, your agency will establish your TSP account after you make a contribution election using your agency’s election system.

BRS Members of the Uniformed Services

Members of the uniformed services who began serving on or after January 1, 2018, will automatically enroll in the TSP once you serve 60 days. By default,  3% of your basic pay is deducted from your paycheck each pay period and deposited in the traditional balance of your TSP account. You have can always select to change or stop your contributions.

 

About Stoyan Panayotov

I am a fee-only financial advisor and the founder of Babylon Wealth Management. As fiduciary advisors, we provide bespoke wealth management and personalized financial planning to busy families in the Bay Area and nationally. Many of our clients are tech workers, physicians, business owners, professionals preparing for retirement and young families looking to build financial independence.

I started Babylon Wealth Management to help young families and successful professionals build, grow and preserve their wealth. Being a fee-only financial advisor, I never earn sales commissions or sell investment products. Furthermore, I am committed to acting in my clients’ best interest by providing trusted advice and bespoke wealth management solutions. I enjoy helping clients develop robust and personalized long-term financial plans to achieve their personal and financial goals.

After completing a bachelor’s degree in Accounting at Varna University of Economics in Bulgaria, at the age of 23, I moved to New York City to pursue a Master of Business Administration at Pace University. I was fortunate enough to have a full merit-based scholarship and finished graduate school with no student loans. Upon completing grad school, I joined the ranks on Wall Street for nearly two years. I specialized in risk management and option strategies for equity and fixed income products for Deutsche Bank and Wells Fargo. In 2006 I obtained a highly recognized CFA designation.

Living in New York without family support was a life-changing experience for me. II arrived at JFK Airport on August 24, 2002. I stayed in a hostel for two weeks and later moved in with three of my fellow Bulgarian students into a one-bedroom apartment in the Bronx. There was a time in life when all I owned was $200, just enough to pay for the next month’s rent. Many times, I contemplated returning to Bulgaria, but somehow, I always pushed through life’s adversities. I’ve learned to appreciate each moment, big or small, that life presents. These challenges have helped me develop strength and flexibility, which supports my practice as a financial advisor.

View All Posts