TSP

John Grobe

We’re nearing the end of 2020 (Thank God!) and there’s still time to be sure you take advantage of the financial opportunities that are available to you.

If you’re still working and contributing to your Thrift Savings Plan account, make sure you max out your contributions, or, at least, get more money into the TSP. While your contributions to FERS and to Social Security are mandatory, those that you make to your Thrift Savings Plan are completely voluntary. If you want more set aside in your TSP, it’s completely up to you to set it aside. No one else can do it for you.

If you’re on track to hit the maximum contribution ($19,500, plus an additional $6,500 if you are 50 or over this year), then you can pat yourself on the back and plan to stay the course for 2021. In 2021, the TSP contribution limits haven’t changed from 2020, so you can simply contribute the same amount in 2021. If you’re 50 or older, be aware that spillover contributions will come into being in 2021. You’ll just make one allocation ($26,000 for the year) rather than two if you’re able to max out both the regular and catch-up amounts.

If it looks like you will not be able to reach the maximum contribution for 2020, you can still up your contributions for the last couple pay periods of the year. Remember – more is better when it comes to setting money aside for your retirement. After you have put more money into the TSP at the end of 2020, ask yourself whether you can keep setting more aside during 2021. Look at your budget and see if there’s room for upping your retirement savings.

Don’t forget Individual Retirement Arrangements (IRAs). I am surprised at the number of people who think that the fact that they fund their TSP account precludes them from participating in an IRA. Nothing could be further from the truth – IRAs and the TSP are not mutually exclusive. For 2020, you can contribute $6,000 to an IRA and another $1,000 if you are 50 or older this year. Plus, you do not have to have contributed that money by December 31, 2020; you have through April 15, 2021 to fully fund your 2020 IRA.

For 2021, the IRA contribution limits, like the TSP limits, have not changed. And your 2021 IRA contribution can be made between January 1, 2021 and April 15, 2022. Congress is considering changes in retirement savings for 2021 and beyond that might increase IRA contributions, so stay tuned to FEDweek’s TSP Investment Report to keep on top of changes that might affect you. Here at FEDweek, our goal is to ensure that you have the tools to build the best possible retirement. When Don Mace founded FEDweek in the 1990s after a successful career as a publisher, his goal was to put federal employees and retirees first – and that continues to be our goal now and in the future.

What if you’re retired, what do you need to be aware of as the end of the year approaches? One thing you don’t need to be concerned about this year is whether or not you have taken a required minimum distribution (RMD). Normally, those 72 and older need to withdraw a specified amount from their retirement accounts (i.e., Roth TSP, traditional TSP, and traditional IRA) each year. The CARES act eliminated the requirement to take a minimum distribution in 2020, but not for future years.

One last thing. If you have any money left over after contributing to your TSP and an IRA, consider setting it aside in an emergency fund. 2020 taught many of us the benefit of having money set aside in case of an emergency.

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