Retirement & Financial Planning Report

Both of the two investment limits in the TSP are rising for 2020, an opportunity for investors who are making the maximum investments to increase their payroll withholding.

The standard investment limit, called the elective deferral limit, is rising from $19,000 to $19,500, and the “catch-up contributions” limit is rising from $6,000 to $6,500. Those are allowable investments above the standard limit for those who are age 50 or older (or will be by the end of a year) and who have already invested the standard maximum, or are on an investing pace to do so by the end of the year.

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TSP investments can be made either on a dollar amount per pay period basis or on a percentage of salary basis. To meet the 2020 maximum over 26 pay periods on a dollar-amount basis would require increasing biweekly withholding from about $730 to $750. The needed adjustment for those investing on a percentage of salary basis would depend on the individual’s pay situation, including not only general raises but also potentially higher pay from within-grade increases or promotions.

While standard contributions roll over from one year to the next unless you direct otherwise, catch-up contributions stop at a year’s end and a new election must be made in the following year. Starting in calendar year 2021, no separate election will be needed; those who qualify will have investments above the standard limit made automatically in catch-up status until they reach the limit for that, as well.

About 5 percent of TSP investors hit the annual standard dollar maximum, most of them old enough to make catch-up investments, as well. Of those, most in turn also hit the catch-up maximum.

TSP Investors Handbook, New 6th Edition