Limit Increases For 2020 (TSP)
Participants of the Thrift Savings Plan (TSP) can contribute an extra $500 to their maximum contributions limit starting next year. The cap for 2020 will be $19,500 compared to this year’s $19,000.
Those who wish to meet the limit threshold and ensure they receive all eligible contribution matches will need to put in every pay period of $750 in a year that has 26 pay periods. For a year that has 27 pay periods, they would need to put $723 into their TSP every pay period.
For federal employees or military personnel that will be 50 years old next year or older, they will also be getting a $500 increase to their catch-up contribution limit, which will be $6,500. Keep in mind that catch-ups can be done in a short period rather than throughout the 12 month calendar year because these do not qualify for matching contributions.
In 2021, the TSP will permit regular and catch-up contributions to be lumped together. For those that will be affected, be sure to keep an eye on the Thrift Board for updates regarding the matter.
IRAs will not have any limit increases for next year. The limit will still be $6,000. Those eligible for catch-ups have the same cap as this year of $1,000.
The changes that will affect IRAs are income restrictions. The first is in regard to deducting how much money you put into an IRA. The second is about contributing to a Roth IRA.
An employee under an employer-sponsored retirement plan is unable to deduct contributions if they make a certain amount in earnings.
A single filer can deduct traditional IRA contributions if they bring in an income less than $65,000 a year. If someone makes over $75,000, they will not be able to make deductions on any contributions at all.
If you have a spouse that also participates in a workplace retirement program, and you plan to file together, you can make a full deduction on traditional IRA contributions if your combined earnings are under $104,000. If over $124,000, no deductions can be made.
Typically those who will be filing jointly but the spouse is not a participant of a retirement savings program will still have the same caps. However, you may be eligible to make a full deduction on the IRA contributions if the combined income is under $196,000, but no deductions can be made if their earnings are over $206,000.
For Roth IRAs, there will be limits on whether you can put money in or not.
A single filer can fully contribute to a Roth IRA if they earn below $124,000. Not contribution can be made if they bring in more than $139,000.
Those that will be filing with their spouse can contribute fully if their income is under $196,000. Those that have an income of over $206,000 will not be able to contribute.
Have some caution because you may face penalties and taxes for contributing to a Roth IRA when you aren’t supposed to. You can meet the same problems if you make deductions to a traditional IRA when you are not eligible to do so.
Regarding the Thrift Savings Plan, you are not able to put in more than what the caps are, but be sure you do not make the mistake of reaching the maximum limit before the end of the year. If you do, you’ll end up missing outing on a few employer matches.
