Since Congress passed the Setting Every Community Up for Retirement Enhancement Act of 2022 (SECURE 2.0), two upcoming changes in the new law will affect how Thrift Savings Plan (TSP) participants contribute to their accounts.
In 2025, Higher Catch-Up Contribution Limits At Age 60, 61, 62 & 63
As of January 1, 2025, TSP participants aged 60, 61, 62, and 63 will have a higher catch-up contribution limit. For these age groups, the IRS catch-up limit will increase to the greater of $10,000 or 150% of the regular catch-up limit. Add to this, the increased amounts will be indexed for inflation.
Currently, the 2024 limit for catch-up contributions is $7,500 for TSP investors age 50 and older who have reached the standard contribution limit of $23,000. Since the TSP no longer requires a separate election for catch-up contributions, once the standard limit is reached, contributions will automatically “spill over.” TSP savers can make one contribution election that remains in effect unless they choose to stop or change the election. Those who already have a contribution election on file don’t need to change it. However, those aged 60 through 63 who do not want to contribute to the higher catch-up contribution limit need to adjust their contributions accordingly.
“Since Roth TSP contributions are deducted from after-tax earnings, you won’t pay taxes in retirement when you withdraw your contributions and any qualified earnings.”
In 2026, Catch-Up Contributions For High Earners Must Be Made To The Roth TSP
If your wages for 2025 are greater than $145,000, any catch-up contributions you make for 2026 will go to your Roth balance. Since Roth contributions are made with post-tax earnings, you’ll have to pay taxes on that amount at your current income tax rate. According to the TSP, the wages that determine if the new rule applies to you are equal to Medicare wages listed in box 5 of your W-2(s). If it does apply to you, your TSP catch-up contributions will change automatically to Roth TSP contributions once you meet the annual elective deferral limit. Keep in mind, you don’t need to set up a separate account for a Roth TSP. You’ll have two separate balances within one TSP account: your traditional TSP balance and your Roth TSP balance.
Advantages Of The Roth TSP: Since Roth TSP contributions are deducted from after-tax earnings, you won’t pay taxes in retirement when you withdraw your contributions and any qualified earnings. As of 2024, the Roth TSP is no longer subject to Required Minimum Distributions (RMDs). This means your Roth TSP savings can grow as long as you want and it won’t create a tax burden for your beneficiaries. To learn more, connect with an FRC® trained advisor.
