Thread: TSP Contribution Limits - My Mistake is Your Lesson Learned

Sorry to hear of your plight, mbrogz3000.

Since you started this thread as a lesson learned I thought I would add another warning for a potential gotcha.

If you are 50 or older the contribution limit to a 401K type plan like our TSP is increased to $24,000 (2015 & 2016). Unfortuantely my agency treats the extra $6000 as a seperate contribution called the catch-up contributiuon that really complicates matters.

You can contribute whatever you want to the catch-up contribution and it will automatically stop when it reaches $6000.

The regular contribution is more problematic. You have to make sure that you contribute enough every pay period to receive your agency matching contributions. Agency matching is based on regular contributions, not catch-up, so you can't do this sequencially. You have to contribute to both throughout the year. You also need to make sure that you max out the $18,000 of regular contributions before the end of the year if you are contributing to the catch-up. This is critical. If you don't max out the regular contribution my agency will return all of your catch-up contribution for the year and you'll be out of luck.

So, I hope you are good at math because you are going to have to compute how much to contribute each payday to meet both requirements. Oh, and don't forget to keep track of your paydays (not pay periods) for the year because sometimes we get 27 instead of 26 paydays a year. That's my case this year. They certainly don't make it easy on you. You'd think they don't want us to save for our retirement or something.

holy cow. I was just about to try and contribute to both. looks like I will just do my primary tsp first, and not touch catch up until I max out primary

Originally Posted by Cactus

Sorry to hear of your plight, mbrogz3000.

Since you started this thread as a lesson learned I thought I would add another warning for a potential gotcha.

If you are 50 or older the contribution limit to a 401K type plan like our TSP is increased to $24,000 (2015 & 2016). Unfortuantely my agency treats the extra $6000 as a seperate contribution called the catch-up contributiuon that really complicates matters.

You can contribute whatever you want to the catch-up contribution and it will automatically stop when it reaches $6000.

The regular contribution is more problematic. You have to make sure that you contribute enough every pay period to receive your agency matching contributions. Agency matching is based on regular contributions, not catch-up, so you can't do this sequencially. You have to contribute to both throughout the year. You also need to make sure that you max out the $18,000 of regular contributions before the end of the year if you are contributing to the catch-up. This is critical. If you don't max out the regular contribution my agency will return all of your catch-up contribution for the year and you'll be out of luck.

So, I hope you are good at math because you are going to have to compute how much to contribute each payday to meet both requirements. Oh, and don't forget to keep track of your paydays (not pay periods) for the year because sometimes we get 27 instead of 26 paydays a year. That's my case this year. They certainly don't make it easy on you. You'd think they don't want us to save for our retirement or something.

Originally Posted by offroad

holy cow. I was just about to try and contribute to both. looks like I will just do my primary tsp first, and not touch catch up until I max out primary

No you don't want to max out the regular (primary) TSP first. You would lose your FERS matching just like mbroqz. If you're maxing out don't use % of salary either - that is too difficult to compute. Normally you would have 26 pay days in a year. So max out on the $18,000 by contributing $693 per paycheck - always round up on the cents. For the over 50 yr old catch-up max out by contributing $231 per paycheck. Make these contributions for all 26 pay days. If you mess up the calculation in the early part of the year you can correct it by dividing the remaining amount of the maximum contribution by the remaining amount of pay days.

Yes I understand. My situation is the later. I messed up for the year and now need to maximize for the remaining four paychecks.


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+1 Good advice for those able to contribute to the catch up portion.

Another little hack to consider: Roth TSP theoretically lets you contribute $18k in after tax money per year, which is significantly greater than the current $5.5k allowed by a normal financial product provider. The tax is robbed from you up front..and is then allowed to grow tax free throughout the investment period. The advantage is 'Tax the seed, not the harvest' so to speak.

Depending on lifetime performance and risk, contributing the full $18k to the Roth TSP could either be good or bad. Since we don't have time machines or crystal balls, 5% of the contribution should be placed towards TSP (401k) portion first in order to maximize the agency matching. Then the remainder then should be placed towards Roth TSP.

For those wanting to do this saving strategy... Manually calculate 5% of your yearly salary, and divide by 26. This dollar amount is your biweekly TSP contribution that will guarantee full agency matching. Then take 18000 minus the manually calculated 5% tsp contribution...and divide it by 26. This dollar amount is your biweekly Roth TSP contribution.

The disadvantage of course is more taxes will be taken up front, and you'll potentionally be in a higher tax bracket.

Being able to grow $18k tax free year after year is almost too good to be true... This will probably get altered eventually just like the unlimited TSP trades.

Originally Posted by mbrogz3000

+1 Good advice for those able to contribute to the catch up portion.

Another little hack to consider: Roth TSP theoretically lets you contribute $18k in after tax money per year, which is significantly greater than the current $5.5k allowed by a normal financial product provider. The tax is robbed from you up front..and is then allowed to grow tax free throughout the investment period. The advantage is 'Tax the seed, not the harvest' so to speak.

Depending on lifetime performance and risk, contributing the full $18k to the Roth TSP could either be good or bad. Since we don't have time machines or crystal balls, 5% of the contribution should be placed towards TSP (401k) portion first in order to maximize the agency matching. Then the remainder then should be placed towards Roth TSP.

For those wanting to do this saving strategy... Manually calculate 5% of your yearly salary, and divide by 26. This dollar amount is your biweekly TSP contribution that will guarantee full agency matching. Then take 18000 minus the manually calculated 5% tsp contribution...and divide it by 26. This dollar amount is your biweekly Roth TSP contribution.

The disadvantage of course is more taxes will be taken up front, and you'll potentionally be in a higher tax bracket.

Being able to grow $18k tax free year after year is almost too good to be true... This will probably get altered eventually just like the unlimited TSP trades.

Sorry, I don't follow your logic at all.

The gov't, your employer, will match you 5% whether you are contributing to Traditional TSP OR Roth TSP. It doesn't matter. It's just that the 5% Match will go into your Traditional IRA. The decision whether to go Traditional or Roth TSP is discussed in other threads, but has nothing to do with the 5% matching.

Also, the math has been worked out saying that it doesn't matter whether you pay the tax up front or at the end if you assume the same rate of return and the same tax rate. What DOES matter is what tax bracket you are in when you pay the tax. You want to pay taxes when you are in a low bracket. And this leads to the problem of when you withdraw funds from TSP. They (TSP) do not allow you to withdraw only from Traditional or Roth, nor do they allow you to put Traditional and Roth funds in different Fund allocations. Again, these issues are discussed in the Traditional vs Roth TSP advantages threads so I won't belabor them here.

BUT, I do not expect that the Roth option will ever be reduced, because the gov't will always prefer to get their $$ up front. If you look at IRAs, they disallow Traditional IRAs as income goes up, and ONLY allows Roth IRA at the higher income levels.

Go for Roth TSP if you like Roth.....but please decide based on the plusses and minuses between the 2 types. Roth is not automatically the best route. Good Luck in your retirement goals!!

Heads up everyone. Now is the time to set up your allocations for 2016.

The contribution limits for 2016 are $18,000 with a $6000 catch-up contribution for those who will be 50 or older in 2016. If you want to max out your contribution and spread that out evenly over 26 paydays you need to contribute $693 to reach $18,000 and $231 for the $6000 catch-up contribution.

Originally Posted by Cactus

Heads up everyone. Now is the time to set up your allocations for 2016.

The contribution limits for 2016 are $18,000 with a $6000 catch-up contribution for those who will be 50 or older in 2016. If you want to max out your contribution and spread that out evenly over 26 paydays you need to contribute $693 to reach $18,000 and $231 for the $6000 catch-up contribution.

Or you can use my Spreadsheet for planning...

Originally Posted by Frixxxx

Hey all,

My updated spreadsheet for TSP contributions for 2016
Spreadsheet is free for public use since it is math only (conditional formatting), spread the word, spread the knowledge. And for the love of all that is holy, Spread the Love!
Attachment 36077

Originally Posted by Frixxxx

Or you can use my Spreadsheet for planning...

Frixxxx you did way too much work in that spreadsheet my friend!

Cell B3 should have been =$A3*B$4/(26*100)

Then its just click and drag, or copy-paste from there!

Originally Posted by k0nkuzh0n

Frixxxx you did way too much work in that spreadsheet my friend!

Cell B3 should have been =$A3*B$4/(26*100)

Then its just click and drag, or copy-paste from there!

Let me introduce you to the associative property of mathematics.

I created this when I worked and lived in a vault......so yeah, I could have been more creative.

Maybe my next life.

Just wanted to post a brief follow-up. As evident on my past 3 paychecks - my agency has still been providing me the 1% TSP Basic match, even though I'm not technically contributing to the TSP for this period of time. So I'm only losing out on 4% agency matching, not 5%. If I have time, I'll go back into what I wrote and clean it up.