TSP Expands Maximum ContributionApril 6, 2018 / by Aubrey Lovegrove
Did you save the maximum of $18,000 in your TSP last year? If you did, you might be interested to hear that the maximum for 2018 added $500 more to the ceiling, an excellent option for those who want to lower their taxable income. This option will create a tax-sheltered account that will grow and compound over the years until you withdraw it, at which point it will be taxed as income. However, this is not the only option- there is now the alternative of making after-tax Roth contributions. This offers no tax delay for the present, but down the road when you withdraw the money, you will not have to pay taxes on it. Note that to have this take effect, you must have contributed for at least five years as be at least fifty-nine and a half.
Some Basics of the TSP
The Thrift Savings Plan has several options, all of which have varying degrees of security and flexibility. The C fund holds large-company stocks, the S fund holds small company stocks, the F funds is made up of bonds, and the G fund invests in securities. L funds are a similar concept to target-date funds in normal 401(k) accounts; they invest in the other five, but as you get closer to your end goal they cool off to a low-risk, conservative portfolio. If your retirement is far off and you can stand some fluctuation, the C fund tracks the S&P 500. The risk of losing some of your investment is much higher than the other TSP options, but the potential returns are the highest possible.
Importantly, save at least five percent of your annual income. The government will contribute a total of 4% for your five, and if it is under the maximum, you can still participate in the added interest accumulation. If you are over 50, you may be able to contribute even more to your TSP, bringing the possible total to $24,500. That’s over twenty-four thousand dollars per year that you could be gaining interest on- not a bad quantity for a safe and sane retirement.