The IRS has announced the 2021 contribution limits for tax-advantaged retirement plans – there’s not a lot of change from 2020.
Don’t forget that you can contribute to both a 401(k)/TSP type employer-sponsored plan and an Individual Retirement Arrangement (IRA), and that non-working spouses can have IRAs, too.
2021 Limits for Employer-Sponsored Plans like 401(k)s and TSP
The elective deferral limit, which is the “regular” limit on employee contributions, remains at $19,500 for 2020. This is the most an employee can contribute to their employer-sponsored plans, such as the Thrift Savings Plan (TSP) under typical situations. Employer or government matching funds do not count towards that limit.
There is an additional catch-up limit for those who are age 50 or older during the year. Those folks can contribute an additional $6,500 to their employer-sponsored plans, for a total contribution of $26,000. This limit is also the same for 2021 as it was for 2020, but there’s a new method for putting catch-up contributions into TSP.
Then, there is another limit, called the annual additions limit, that applies to the total amount that can be contributed to these plans. For most people, this is the limit for the total of both employee and employer contributions, but there’s a special twist if you spend time in combat zone during the tax year. This limit rises to $58,000 (or $64,500 if you’re 50 or over.) There are some tricky rules if you’re hoping to contribute extra while you’re in a combat zone, and you’re going to want some help to make sure you do that correctly. Heck, DFAS and the TSP folks are still working out some of the rules as it applies to BRS…
Individual Retirement Arrangements (IRA)s
The 2021 limit for contributions to IRAs remains the same $6,000 per person, with an additional catch-up of $1,000 if you’re age 50 or older. IRA contributions must be made from earned income, but you can contribute to one spouse’s IRA with income earned by the other spouse. While these are technically called a spousal IRA, they’re not a special type of IRA. It’s just a special rule that permits you to use another person’s money to fund your IRA.
Roth vs. Traditional
Keep in mind that you can have your TSP money in either a Roth or a traditional TSP account, and you can also have an IRA that is either Roth or traditional. They’re entirely separate. You can even have both a traditional and Roth TSP account, as long as the total amount contributed stays under the limits. Likewise, you may have both a traditional and Roth IRA account, as long as the total amount contributed stays under the limits.
Let me know if this is confusing!
I can not find a direct simple answer for this: Is the $19000 contribution limit inclusive across both a traditional Roth IRA and TSP? Currently we are on track to contribute the limit to our separate Roth IRAs ($6000), and in addition, another $13000 to TSP. Are we leaving $6000 on the table for contribution to our TSP, or are we going to hit the limit? Thanks for any help!
Jean, TSP and IRA are different types of accounts and they have their own separate contribution limits. You an contribute $6,000 to your IRA and a separate $19,000 to TSP.
Does that help?
Had the same question. Thanks for the help. Do you have a reference so I can privide to others that ask?
What kind of reference are you looking for? A google search of “2019 contribution limits” pulls up pages of results. Here is a link to the IRS announcement: https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19000-for-2019-ira-limit-increases-to-6000
Sorry if this is a dumb question. Is it possible for a service member to maximize contributions to the Roth TSP(19k plus BRS match), SM spouse contribute to a private Roth TSP (6k max), and have the SM open an additional Roth outside of the TSP (another 6k)? For a total of 31k Roth contributions for the family? Trying to maximize retirement savings…
If not, what other retirement acct should a SM open to increase retirement savings?
Thanks!
There is no such thing as a private Roth TSP.
Service members who are under 50 and not deployed to a tax-free combat zone are limited to $19,000 plus BRS match in their TSP account (Roth or Traditional) and $6,000 in an Individual Retirement Arrangement (IRA) (Roth or Traditional.)
If your spouse works, they may contribute to any employer plan (401k, TSP, 503b, etc.) plus $6,000 their own IRA (Roth or Traditional). Non-working spouses may contribute up to $6,000 to their own IRA (Roth or Traditional), assuming the working spouse has income in excess of their joint IRA contributions.
If you are looking strictly for tax-advantaged retirement savings, your next plan would be to open a small business and a SIMPLE IRA, SEP IRA, or Individual 401(k). However, there are benefits to having taxable investments as part of your portfolio, so that may be better for your specific situation.
I hope that helps.
I have TSP, a Traditional IRA and a Roth IRA. I intend to put the maximum amount into each. I’m over 50. Can you bottom line the details again for me on the limits?
Hello, I appreciate your well versed article! I do have a question though. I am a new gov employee and my wife is a federal contractor. Can I contribute 19K from my salary toward the TSP along with the agency matching the first 5% (equaling 5k) for a total of 24K?
Also I want to contribute the max 6K to a traditional IRA I currently have. Our household income exceeds 203K combined, so I believe that we are unable to contribute to any type of Roth whether 401k/TSP/IRA? Am I in the right ballpark with this?
My finances recently drastically changed for the better. I have a TSP account (non-roth), a separate Roth IRA with my bank (not associated with my TSP account), and my wife has a spousal Roth IRA. My understanding, based on the above and other articles, is that I can contribute a max of $19,000 (2019 & $19,500 (2020)) to TSP. If I contribute the maximum to TSP, how does that impact the maximum contributions to my and my spouse’s Roth IRAs? Bottom line, absent income caps, how much can we put into our Roth IRAs, if we maximize TSP contributions?
TSP and IRA limits are separate parts of the tax code, so you can contribute $19,000 to TSP (($19,500 for 2020) AND you can each contribute $6,000 to each IRA both years.
Great job maxing out those tax-advantage retirement vehicles!
If I contribute $19,000 in TSP and $6000 in ROTH IRA for 2019, can I take $6000 as IRA contribution deduction on the tax return?
Roth IRA contributions are after tax, so you wouldn’t deduct them on your tax return. Traditional IRA contributions are pre-tax.
My wife and I are both SMs. Can we each individually max out our TSP Roths? Total of 38k?
Thanks!
Yes, and your IRAs. If either of you are CZTE during the year, you can also contribute beyond the $19K each into the Annual Additional Limit. It can get a little tricky – I recommend you read this article and then sit down with someone who thoroughly understands it to plot out the best way to do it. https://the-military-guide.com/maximizing-your-thrift-savings-plan-contributions-in-a-combat-zone/
THANK YOU KATE!
This is literally the only place on the interwebs I’ve found the answer to the dual service member TSP question.
Bless you 🙂
Wendy Dy
Kate, married filing joint, both spouses work and MAGI is slightly above $196K for 2020. We fall into the Roth IRA phase-out range. Can one spouse contribute $6k and the other spouse contribute much less to meet the phase-out restriction?
Good question! I have never considered that you couldn’t, but I’ve never really researched it, either. I’d suggest chatting with a tax professional!
Good problem to have!
I’m hoping you can answer my question. I’m retired from federal service and currently receiving a monthly pay out from my TSP account. After retirement I got a part time job that included matching employer funds to a traditional IRA (Merrill Lynch.) I took advantage of that and now have over 10k in that account. I’m retiring completely next month and have been researching ways to defer and save on taxes for this account. Can I roll this over into my TSP account even though I’m currently receiving pay outs from it? I have everything in the G fund now and my account from my part time job has everything at risk; another reason I’d like to roll it over. Thanks
Hi Carla, I’m unaware of any reason why you could not move your money to TSP, but I’ve not researched that exact question. The folks at TSP are super-helpful – have you called them? https://www.tsp.gov/tsp-basics/move-money-into-tsp/ Good luck to you!