Big news for federal employees: the IRS has announced higher Thrift Savings Plan (TSP) contribution limits for 2025. This means you’ll have even more room to grow your retirement savings starting next year.
2025 Contribution Limits
In 2025, you can contribute up to $23,500 to your TSP—$500 more than in 2024. This increase also applies to private sector retirement accounts like 401(k), 403(b), and 457 plans.
For those aged 50 to 59, the catch-up contribution limit remains at $7,500. However, if you’re between 60 and 63, the catch-up limit rises to $11,250, thanks to the SECURE Act 2.0.
If you’re saving with an IRA as well, the 2025 contribution limit stays at $7,000, with a $1,000 catch-up contribution for anyone 50 or older.
Should You Start Building a Roth TSP?
As the new year approaches, it’s a great time to think about the Roth TSP. Currently, only about 20% of TSP participants contribute to a Roth balance, but the benefits are hard to ignore.
Roth TSP contributions are made with after-tax dollars, so withdrawals in retirement are tax-free. This setup gives you the tax advantages of a Roth IRA while offering the TSP’s diverse investment options and low management fees.
And here’s more good news: the SECURE Act 2.0 eliminated Required Minimum Distributions (RMDs) for Roth TSP accounts starting in 2024. This means your Roth TSP can keep growing tax-free for as long as you want.
A Roth TSP also makes a better inheritance option for your loved ones. Unlike a traditional TSP, where beneficiaries owe income taxes on withdrawals, Roth TSP funds can be passed on tax-free.
Are You Taking Full Advantage of the TSP Agency Match?
Don’t leave free money on the table! If you’re not contributing at least 5% of your salary to your TSP, you’re missing out on the agency match. Both Traditional and Roth TSP contributions qualify for this match. However, keep in mind that the matching funds are deposited into your Traditional TSP balance and will be taxed when withdrawn.
With higher limits and tax benefits to consider, now is the perfect time to review your TSP strategy. Connect with an FRC® trained advisor to make the most of your retirement savings in 2025 and beyond.
