Time to think about your 2024 contributions - for younger feds and those closer to retirement.
With less than two weeks left in calendar year 2023, now is the time for those employees continuing in federal service during part of or throughout calendar year 2024 to decide how much they will contribute to the TSP, starting with the first pay date in January 2024. The emphasis here is the first pay date and not the first pay period. In order for employees to understand why pay dates are important for TSP contribution limits, it is important to discuss the difference between the leave year and the calendar year with respect to employee TSP contributions.
Ed hosts a TSP Planning Webinar for Federal Employees -
Those employees who reached the $22,500 or $30,000 contribution limit during pay period 26 will be able to contribute to the TSP for pay periods 26 and 27 of leave year 2023. This is because employees will get paid for pay periods 26 and 27 in January 2024 at which time the TSP contribution limits increase to $23,000 and $30,500, for employees over age 49 as of December 31, 2024.
Those employees who plan to retire or leave federal service anytime during 2024 are able to contribute the maximum possible even though they will not be working in federal service throughout calendar year 2024. Retirement from federal service includes early retirement such as a Voluntary Early Retirement Authority (VERA) with no buyout, or a Voluntary Separation Incentive Payment (VSIP) with a buyout. A FERS-covered employee who reaches his or her minimum retirement age (MRA) and leaves federal service sometime during 2024 with at least 10 years and fewer than 30 years of service under the “MRA+10” or “MRA +20” postponed retirement option is also allowed to contribute the maximum possible to the TSP until his or her last pay date.
Employees can elect to contribute to the traditional TSP, the Roth TSP, or to both TSP accounts. But their total contributions for 2024 cannot exceed $23,000, for employers younger than age 50 throughout 2024, or $30,500, for employees over age 49 as of December 2024. A FERS-covered employee must contribute at least 5 percent of their salary each pay date during 2024, starting with the first pay date in January 2024 and continuing with the last pay date in December 2024 in order to receive the maximum TSP agency matching contribution during 2024. It makes no difference which TSP account – traditional, Roth or both accounts – the employee contributes to in reaching the minimum 5 percent per pay contribution. A FERS-covered employee’s agency will always contribute the automatic 1 percent and maximum 4 percent matching contribution to the employee’s traditional TSP account and not to the employee’s Roth TSP account.
The following worksheet will assist a FERS-covered employee to achieve the goal of maximizing their contributions during 2024 and receive their agency’s maximum agency matching contribution of four percent:
| Amount to be contributed to the traditional TSP and/or Roth TSP | __________ |
| Divided by: Number of pay dates during 2024 | ÷ __________ |
| Amount to be deducted from bi-weekly salary starting with the first pay date in January 2024 | __________ |
The following two examples illustrate:
Example 1. Elizabeth is a federal employee, aged 43. Elizabeth wants to maximize her 2024 TSP contributions. She is covered by FERS and wants to make sure she receives the maximum 4 percent matching contributions from her agency during 2024. Elizabeth uses the above worksheet to determine her bi-weekly TSP contribution during 2024, starting with her first pay date in January 2024.
| Amount to be contributed to the traditional TSP and/or Roth TSP | Traditional TSP: $16,000
Roth TSP: $7,000 Total $23,000 |
| Divided by: Number of pay dates during 2024 | ÷ 26 |
| Amount to be deducted from bi-weekly salary starting with the first pay date in January 2024 | $884.62 |
Example 2. Shaun, age 62, will be retiring at age 62 as a FERS-covered employee on September 30,2024. He will be retiring at the end of pay period 19. Before he retires Shaun wants to contribute the maximum possible during 2024 ($30,500) and receive the maximum four percent agency matching TSP contribution. Shaun uses the following worksheet to determine how much he should have deducted from his salary during 2024, starting with his first pay date in January 2024.
| Amount to be contributed to the traditional TSP and/or Roth TSP | Traditional TSP: $20,000
Roth TSP: $10,500 Total $30,500 |
| Divided by: Number of pay dates during 2024 | ÷ 20 |
| Amount to be deducted from bi-weekly salary starting with the first pay date in January 2024 | $1,525.00 |
Note that both Elizabeth and Shaun have to make arrangements with their agency’s electronic payment processing (such as MyPay or EPP) to ensure that their TSP contributing election will take effect starting on their first pay date in January 2024.
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Edward A. Zurndorfer is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Life Underwriter, Chartered Financial Consultant, Chartered Federal Employee Benefits Consultant, Certified Employees Benefits Specialist and IRS Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, and EZ Federal Benefits Seminars, located at 833 Bromley Street - Suite A, Silver Spring, MD 20902-3019 and telephone number 301-681-1652. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.
