Be Sure to Take Advantage of Catch-Up Contributions Before the Year is Up

With only two months left to the end of 2019, there is limited time for TSP participants to make an election for catch-up contributions to their TSP, and those that are contributing large amounts may need to change their investments to lower amounts if they are at risk of reaching their yearly contribution limit before the end of the year.

For those that are not sure what catch-up contributions are or whom they apply to catch-up contributions are for those who are at least 50 years of age or older and have reached the contribution cap of $19,000 for 2019, or are on their way to reaching the amount by the end of December.

The catch-up limit that can be invested maxes out at $6,000 for 2019. These contributions are made by withholds from payroll, so to maximize benefits with just a handful or so of pay periods to go, participants will have to elect large amounts to be held from their paychecks. However, this is only recommended if they are able to live off of shortened income until the end of this year.

Fortunately, in 2021, the TSP will implement a policy where TSP holders will automatically be able to make contributions until they reach the catch-up limit, rather than having to elect to make these extra catch-up contributions.

Additionally, FERS members need to plan their savings so that they put at least 5% of their income in each pay period of the year into their investments to get the maximum government contributions. If they reach the annual cap of $19,000 before the end of December, they would no longer be allowed to contribute more until the following year. Also, any contribution matches that are up to 4% of earnings would stop and will not recoverable. However, the standard 1% of salary agency contributions will still be in effect.

For any questions or doubts to be addressed, TSP participants should reach out to payroll to get information on how many TSP contribution periods are left for the year. Keep in mind that these TSP contribution dates are not quite the same as pay distribution dates. Once they have correct dates, they can then make changes if able to make the most of their investments.