TSP Contribution Limits Remain Unchanged for 2021

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Wooden blocks flipping over to display new year 2021

The IRS has announced that the maximum amount of money you can contribute to retirement savings plans like the Thrift Savings Plan (TSP) will remain unchanged for 2021.

You can contribute part of your salary now to the retirement savings account to add to your your tax-deferred or tax-free retirement nest egg and save more money now for later in life. The maximum contribution rates in 2021 will be:

  • $19,500 for regular TSP or 401(k) contributions
  • $6,500 for catch-up contributions for those 50 and over
  • $58,000 annual limit for tax-free combat zone pay (up from $57,000 for 2020)

Individual Retirement Account (IRA) holders will also have the same maximum contribution amounts in 2021 as they did in 2020: $6,000 for regular contributions and $1,000 for catch-up contributions.

To contribute the maximum amount to your TSP you should contribute $1,625 monthly, or $812.50 each payday.

Of course, you can withhold nothing and put the entire $19,500 in at a later date. But if you do that, you lose the Defense Department's 5% match if you are under the Blended Retirement System. You should be contributing at least 5% of your base pay each payday to get the matching funds from the DoD. If you don't, you are basically throwing away free money.

You also shouldn't pay the $19,500 ahead of time, you may also lose the matching government contributions if you do.

You can also change the withholding percentage through the myPay website at any time. That means you can keep it at 5% and then increase it if you deploy or get a bonus.

If you want your withholding percentages to be effective for the first payday of 2021, you must make the change in myPay before mid-December. The Defense Finance and Accounting Service and myPay usually require about three weeks to make any changes to your TSP withholding.

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