The Thrift Savings Plan (TSP) is one of the most crucial retirement savings programs available to federal employees and military personnel. Understanding the annual contribution limits and investment options is essential to making the most out of this tax-advantaged savings plan. With new changes coming in 2025, it’s time to review how much you can contribute and which funds are best suited for your retirement goals.
Yes, TSP contribution limits will increase in 2025. These limits are adjusted based on inflation and legislative changes, such as the SECURE Act 2.0, to ensure that participants can maximize their savings.
These new limits give participants greater flexibility to grow their retirement savings and take advantage of tax-deferred or tax-exempt growth, depending on whether they choose a Traditional or Roth TSP account.
To fully leverage your TSP contributions, consider the following strategies:
The best way to grow your retirement savings is to contribute up to the IRS limit. For 2025, that means allocating up to $23,500 from your salary throughout the year. If you are 50 or older, you can contribute an additional $7,500, and if you are between 60-63, you can utilize the “Super Catch-Up” limit of $11,250.
If you contribute too quickly and hit the limit early, you may miss out on agency matching contributions. A good strategy is to divide your elective deferrals across 26 pay periods. For example, if you plan to contribute the maximum $23,500, you should contribute about $904 per pay period.
For federal employees covered under FERS, your agency matches the first 5% of your salary that you contribute. This includes:
To get the full agency match, make sure to contribute at least 5% of your salary each pay period.
Choosing the right TSP funds depends on your financial goals, risk tolerance, and retirement timeline. Below are the main TSP funds available and their potential benefits in 2025:
Your ideal TSP investment strategy depends on your career stage and retirement goals. Here are some recommendations:
Unlike the Traditional TSP, where contributions are made pre-tax, the Roth TSP allows for tax-free withdrawals in retirement. If you expect to be in a higher tax bracket later in life, the Roth TSP can be a powerful tool.
While the TSP is an excellent savings vehicle, consider supplementing it with:
TSP rules and limits change over time due to legislation like SECURE Act 2.0. Keeping up with these changes ensures you take full advantage of new opportunities.
With TSP contribution limits increasing in 2025, federal employees and military personnel have a great opportunity to build their retirement savings more effectively. By understanding the updated contribution limits and selecting the best TSP funds, participants can optimize their portfolios to achieve financial security.
Whether you’re early in your career or nearing retirement, a well-planned approach to TSP contributions and investments will help ensure a stable and comfortable future. Make sure to review your allocations, take advantage of employer matching, and stay updated on the latest policy changes.
If you’re unsure about the best strategy for your retirement savings, consulting with a financial advisor can help tailor a plan to your individual needs.
