Among the key dollar-amount changes for federal employees as of 2020 is that the dollar limit on investments in the TSP, the “elective deferral limit,” is rising by $500 to $19,500. Also, the “catch-up contribution” limit is rising by the same amount to $6,500; that is an additional investment allowed for investors who are at least age 50—or will be by the end of the calendar year—who have reached the standard dollar limit or who are on an investing pace to reach it by the end of the year.
In both cases the figures affect personal investments only and don’t include government contributions for those under FERS or any transfers into the TSP from retirement savings accounts from prior employers. For those investing in both the traditional (tax-free on investment, taxable on withdrawal) and Roth (after-tax on investment, tax-free on withdrawal so long as certain conditions are met), each limit applies to the combined total of both types of investment.
Investments can be made in the TSP on either a percentage of salary basis or a biweekly dollar amount basis. For those using the former method, the biweekly withholding increases automatically when a raise is paid. Since the upcoming raises—varying by locality—will be effective January 5, the first pay distribution reflecting the increase, and the accompanying TSP investment, will therefore occur later in the month. Those investing on a dollar amount basis might wish to increase the selected amount, especially if their goal is to reach the investment maximum.
While regular TSP investments remain the same unless changed, a new election must be made each year to make “catch-up” investments. A recently approved TSP policy change in which investments will automatically “spill over” into catch-up accounts when those eligible for them hit the standard limit won’t take effect until 2021.
See also, Understanding TSP Withdrawals