The catch-up amount is an allowable investment above the standard limit allowed for those who are age 50 or older in a year. Image: Deemerwha studio/Shutterstock.com
By: FEDweek StaffAmong the key dollar-amount changes for federal employees for 2023 are two affecting investment maximums in the TSP: the standard limit, the “elective deferral limit,” is rising by $2,000 to $22,500, while the separate “catch-up contribution” limit will increase by $1,000 to $7,500.
The catch-up amount is an allowable investment above the standard limit allowed for those who are age 50 or older in a year. For those eligible to make catch-up contributions, any investments beyond the standard limit “spill over”—they are automatically designated as catch-up contributions, up to that limit.
In both cases the figures apply to 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. However, for those investing in both 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) balances, the limits apply to the combination of both.
Employees under FERS also should note that to capture the maximum government contributions, they need to pace their investments so that they are able to invest at least 5 percent of salary in each pay period of the year. If they hit their maximum before that, their investments will shut off, as will agency matching contributions—although the automatic 1 percent agency contribution would continue. There is no such consideration for CSRS employees, who get no government contributions.
One additional consideration regarding timing of investments for 2023 is that it is one of the rare years in which there are 27 pay periods, not the usual 26. For TSP purposes, the key issue is the number of pay distribution dates in a year. That would be something to check with the payroll office.
Meanwhile, the recently enacted wrapup budget measure for this fiscal year raises the age at which retirees must take certain minimum distributions from the TSP (and similar retirement savings programs) from 72 to 73, effective with those who turn 73 in calendar year 2023.
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See also,
The Process of Retiring: Last-Minute Changes
The Process of Retiring: Check Your Agency’s Work
FERS Retirement Planning Bundle: 2022 FERS Guide & TSP Handbook
