Since inflation has been at a record high, it has increased the annual TSP contribution limits because they’re subject to annual cost of living adjustments (COLAs). Here’s an overview of the retirement-related changes for 2023.
The 2023 TSP Contribution Limit Has Increased By 9.8%
On October 21, 2022, the Internal Revenue Service (IRS) announced that the amount individuals can contribute to their Thrift Savings Plan (TSP) in 2023 has increased to $22,500. This is an increase of 9.8% enabling federal employees to save $2,000 more than the 2022 limit. The annual limit for savers who participate in 401(k), 403(b), and most 457 plans has also increased to $22,500 in 2023.
The 2023 Catch-Up Contribution Limit Has Increased To $7,500
For workers age 50 and over, Catch-Up Contributions for 2023 have been increased to $7,500, up from $6,500 in 2022. This works out to an increase of 15.4% over last year putting the total amount that federal employees age 50 and over can contribute at $30,000 for 2023. Of course, in 2023, the $7,500 Catch-Up Contribution also applies to 401(k), 403(b), and most 457 plans.
“Since you control how much you save and invest in your TSP account, it’s your first line of defense against running out of money in retirement due to inflation.”
2023 IRA Contribution Limits
For federal employees who may also have an IRA, the 2023 annual contribution limit has increased to $6,500, up from $6,000 in 2022. Since the IRA Catch-Up Contribution limit is not subject to COLAs it will remain at $1,000 for those age 50 and over.
Other Changes For 2023
The IRS has announced other changes that can affect retirement savers. These include increased income ranges for determining eligibility for making deductible contributions to traditional Individual Retirement Arrangements (IRAs) and to claim the Saver’s Credit, among other changes. For complete details on these and other retirement-related cost-of-living adjustments for 2023, download Notice 2022-55PDF on the IRS.gov website.
Your TSP Is A Significant Part Of Your Retirement Income
Ask yourself this: do you really expect the cost of basics like bread and milk, or gas for your car, to be lower when you retire than they are today? Of course not. Since you control how much you save and invest in your TSP account, it’s your first line of defense against running out of money in retirement due to inflation. That’s why it’s important to take full advantage of the increased limits for annual TSP contributions and TSP Catch-Up contributions in 2023.
Consider working with an FRC® trained advisor who understands your how the TSP works and can help you take advantage of contribution limits for 2023.
