TSP

John Grobe

It won’t be long before the Internal Revenue Service announces the new numbers that will apply to retirement savings in 2022. Every year, in late October or early November, the IRS lets us know what (if any) changes will be made to the savings limits and contribution phase outs for the next year. This gives us plenty of time to change our savings strategy if we need to. For those of us still working and still saving for retirement, these numbers let us know how much we are allowed to stash in tax favored accounts such as the Thrift Savings Plan (TSP) and Individual Retirement Arrangements (IRAs). The income limits apply only to IRAs and let us know whether or not we’re able to deduct our contributions to a traditional IRA or contribute at all to a Roth IRA. Here are my guesses as to what the 2022 numbers will be.

Given the state of the economy and the recurrence inflation, it is highly likely that the amounts we are allowed to set aside in our TSP ($19,500 in 2021) will go up by $1,000 to $20,500 for 2022. But the amount we can contribute to an IRA ($6,000 in 2021) will probably remain the same for 2022. Catch-up contributions ($6,500 for the TSP and $1,000 for an IRA in 2021) will also remain the same. Remember that with the TSP’s “spillover” contributions, you make one contribution allocation (so for 2022 (if my guess is right), the total amount would be $27,000).

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If we actually do receive a 2.7% raise in 2021, almost all of us will see an increase in our take-home pay. We can expect FEHB premiums to increase and those who have optional FEGLI will see an increase if they reach one of the five year intervals. We can use all or part of our increase in pay to increase our TSP and/or IRA contributions.

The TSP does not have income limits that affect contributions, but IRAs do. In the past, even in years of negligible inflation, these limits have crept upwards. I suspect that we will see more increases in 2022. 2021 income phaseouts at which you begin to lose your ability to deduct your contributions to a traditional IRA are listed below, along with my guesses for 2022. You can always make non-deductible contributions to a traditional IRA regardless of how high your income is.

Single filing status
Full deduction allowed if income is below $66,000 (2021) or $68,000 (2022)
Partial deduction allowed if income is between $66,000 and $76,000 (2021) or $68,000 and $78,000 (2022)
No deduction allowed if income is over $76,000 (2021) or $78,000 (2022)

Joint filing status if spouse also belongs to a retirement plan at work
Full deduction allowed if income is below $105,000 (2021) or $109,000 (2022)
Partial deduction allowed if income is between $105,000 and $125,000 (2021) or $109,000 and $129,000 (2022)
No deduction allowed if income is over $125,000 (2021) or $129,000 (2022)

Joint filing status if spouse does not belong to a retirement plan at work
Full deduction allowed if income is below $198,000 (2021) or $204,000 (2022)
Partial deduction allowed if income is between $198,000 and $208,000 (2021) or $204,000 to $214,000 (2022)
No deduction allowed if income is over $208,000 (2021) or $214,000 (2022)

Below you will see the 2021 incomes (and my guesses for 2022) above which your ability to contribute at all to a Roth IRA begin to phase out.  There are no income limits that affect your ability to contribute to the Roth TSP.

Single filing status
Full contribution allowed if income is below $125,000 (2021) or $129,000 (2022)
Partial contribution allowed if income is between $125,000 and $140,000 (2021) or $129,000 and $144,000 (2022)
No contribution allowed if income is over $140,000 (2021) or $144,000 (2022)

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Joint filing status
Full contribution allowed if income is below $198,000 (2021) or $204,000 (2022)
Partial contribution allowed if income is between $198,000 and $208,000 (2021) or $204,000 and $214,000 (2022)
No contribution allowed if income is over $208,000 (2021) or $214,000 (2022)

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TSP Early Withdrawal Penalty Myth

Rollovers: Moving Your Money Out of the TSP

What it Takes to Be a TSP Millionaire

Yes It’s OK to Spend Your TSP in Retirement

FERS Retirement Bundle: 2021 FERS Guide & TSP Handbook