The IRS has announced the 2016 limits for contributions to the Thrift Savings Plan (TSP).
The elective deferral limit remains unchanged at $18,000 for the year. This is the limit for most regular contributions. If you are trying to contribute the maximum amount to your TSP account in 2016, you will need to contribute $1500 per month for the entire year. Of course, you don’t have to contribute an even amount across the year – you can increase and decrease your contributions at any time via the MyPay online account access system. Depending on your situation, you may find it easier to contribute more in the earlier part of the year and then decrease your contributions later in the year. Or, if you’ll be in a Combat Zone Tax Exempt location at any period, you may want to up your contributions during that time.
The catch-up contribution limit, for those aged 50 and over, remains unchanged at $6,000. This means that service members age 50 and over can contribute up to $24,000 of regular pay to their Thrift Savings Plan account. If you’re planning your contributions for next year and want to have an even deduction each month, that equals $2,000 per month.
The total contribution limit, which includes both regular contributions and those made in Combat Zone Tax Exempt (CZTE) locations, remains unchanged at $53,000. Contributions that exceed the elective deferral limit must be made to a traditional (not Roth) TSP account. If you’re in and out of a combat zone mid-year, get some competent help to plan your contributions, especially if you plan to exceed the $18,000 elective deferral limit.
Under federal law, the contribution limits are re-evaluated annually and adjusted based upon cost of living changes. There was not enough change in the cost of living to warrant a change to the limits for 2016.
The Thrift Savings Plan is a superior plan with remarkably low fees, easy enrollment, and convenient payroll deductions. I encourage all my readers to save in their Thrift Savings Plan account, even if it is just a few dollars a month.