TSP

Deferred Retirement

On November 4th, the IRS announced the new numbers that will apply to retirement savings in 2022 – and they were exactly what we predicted they would be a few weeks back. Because the new numbers will not become effective until 2022, we have 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 TSP and in an IRA. 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.

We predicted that the amounts we are allowed to set aside in our TSP ($19,500 in 2021) would go up by $1,000 to $20,500 for 2022. But the amount we can contribute to an IRA ($6,000 in 2021) remains the same for 2022. In a 26 pay period year, you will max out with a contribution to your TSP of $789 per pay period. In addition, catch-up contributions ($6,500 for the TSP and $1,000 for an IRA in 2021) did not change. If you’re eligible to make catch-up contributions, remember that with the TSP’s “spillover” contributions, you only make one contribution allocation rather than the two that were necessary in the past. For 2022 the total amount is $27,000; that’s $1,039 per pay period in a 26 pay period year.

ADVERTISEMENT

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 what remains of our pay increase to make larger 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. And they did so for 2022, mirroring our predictions. The 2022 income phaseouts at which you begin to lose your ability to deduct your contributions to a traditional IRA are listed below. 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 $68,000
Partial deduction allowed if income is between $68,000 and $78,000
No deduction allowed if income is over $78,000

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

Joint filing status if spouse does not belong to a retirement plan at work
Full deduction allowed if income is below $204,000
Partial deduction allowed if income is between $204,000 to $214,000
No deduction allowed if income is over $214,000

Here are the 2022 incomes above which your ability to contribute to a Roth IRA start 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 $129,000
Partial contribution allowed if income is between $129,000 and $144,000
No contribution allowed if income is over $144,000

ADVERTISEMENT

Joint filing status
Full contribution allowed if income is below $204,000
Partial contribution allowed if income is between $204,000 and $214,000
No contribution allowed if income is over $214,000

Remember, even if you reach the maximum contribution limit in the TSP and an IRA, you can sock more money aside in a taxable account.

Key Age Mileposts and the TSP

Increasing TSP Contributions so You’re Not “Livin’ on a Prayer”

Rollovers: Moving Your Money Out of the TSP

TSP: Common Misconceptions

Rollover Into the TSP from an IRA

Annuity, Social Security, TSP: How Your Retirement Income is Taxed

TSP Investors Handbook, New 7th Edition