Some federal employees don’t realize they can contribute to both the TSP and an IRA, they’re not mutually exclusive retirement accounts.

While the elective deferral limit for the TSP was increased to $18,500 for 2018, there is no change in 2018 to the amount that can be contributed to an IRA; it remains at $5,500 with an additional $1,000 allowed for those who are age 50 and older (including those who turn 50 during the year).

There are, however, changes to the deduction phase outs for Traditional IRAs and the contribution phase outs for Roth IRAs. Unlike the TSP, where there are no phase outs, IRAs limit an individual’s ability to deduct their contributions (Traditional) or even to contribute at all (Roth).

For those who belong to a retirement plan at work, as all federal employees do, their ability to deduct contributions to a Traditional IRA begins to phase out at:

  1. $63,000 for the single filing status;
  2. $101,000 for the joint filing status if both joint filers belong to a retirement plan at work; and
  3. $189,000 for a joint filer who does not belong to a retirement plan at work.

The phase out is complete when MAGI reaches:

  1. $73,000 for the single filing status;
  2. $121,000 for the joint filing status if both joint filers belong to a retirement plan at work; and
  3. $199,000 for a joint filer who dies not belong to a retirement plan at work.

*The dollar amounts above are modified adjusted gross income (MAGI), which is your adjusted gross income with some deductions added back in:

Note that there is no income limit on contributing to a Traditional IRA; the income limit applies to the individual’s ability to deduct those contributions on their federal income tax. Even Bill Gates could contribute to a Traditional IRA; he just can’t deduct his contributions.

With the Roth IRA, income above a certain limit prohibits a person from even contributing. Until MAGI reaches $120,000 (single filing status) or $189,000 (joint filing status) an individual can fully contribute to a Roth IRA. If MAGI is over $135,000 (single filing status) or $199,000 (joint filing status) contributions to Roth IRAs are no longer allowed.

There is no income limit on converting a Traditional IRA to a Roth IRA. There is also an age limit on contributing to a Traditional IRA. Once you reach the year in which you turn the age of 70 ½, you are not allowed to contribute to a Traditional IRA. There is no age limit on contributing to a Roth IRA.

If you’re fully funding your TSP and haven’t yet started funding an IRA, you still have time to do so for 2017. The deadline for 2017 contributions is April 17, 2018.