Some Misconceptions Remain

Contrary to what some federal employees continue to believe, government contributions for FERS employees don’t count against the dollar cap. Some investors apparently continue to believe that the best strategy is to invest the maximum in order to get the money into the TSP with its tax-deferral as early as possible. While that works for CSRS employees, FERS employees making $92,857 or more this year risk losing out on some government contributions if they follow that approach. Again, the key for them is to make sure they are investing at least 5 percent of salary for the entire year. Also, some investors apparently are continuing to try to make “catch-up contributions”-up to $3,000 is allowed over and above the $13,000 cap this year for investors who will be at least 50 by the end of the year-by increasing their regular investments. Catch-up contributions must be made separately, and putting in higher amounts thinking those are catch-ups can risk running into the dollar cap too early.