All too many times blogs and articles like this offer tactics and strategies but neglect the transmission point. With this piece, we hope to change that by giving you a crystal-clear key first step. 

Quick quiz:  Since January 1, 2000, how many times has the maximum annual contribution for TSP (excluding catch-up) been increased? (Cue the Jeopardy theme music…)

Answer: 16.  Just shy of 2/3 of the years yielded an increase.

Bonus Question:  Since January 1, 2000, how many times has the TSP catch-up contribution been increased?

Answer: Trick question! The catch-up contribution did not come into effect until 2002, but the answer over the ensuing years is a whopping 8 times in just 22 years. 

Super bonus question:  How many times have you remembered to adjust your contributions in time for the first paycheck of January to accommodate the higher annual contribution limit and ensure you’re still max-funding your TSP?

Answer: Based upon our observations from nearly forty years of serving Feds, not enough times.

So, here’s a suggestion for a new habit.  We know about Spring Forward and Fall Back.  Now, it’s time to add January Jump to common parlance.

We’re not trying to say that being a week late on increasing your annual TSP contributions will lead to financial ruin. What we are saying is that, amid the noise of life, the recognition of your ability to make that increase as well as carving out the time to do so, can get lost. And worse, based on our observations over the decades, too many Feds fail to make the increase all together, and the first time they realize they’re behind is when they meet us.

But is it that so bad?  You’re still putting in the maximum from last year, right?

In 2002, the base TSP annual maximum contributions increased by $1000.  If you just missed that increase one time, no big deal.  Right? Maybe, maybe not.  Let’s check.

Let’s assume the following:  

  1. In January of 2002, you were 30 years old.
  2. You missed adding the additional $1000 for only the year 2002.
  3. You will not touch the money until age 65.
  4. We will use the average historical return for the C fund of 10.01%

4.5) And by the way, NO.  We are NOT recommending that you put all your money in the C Fund. This is a hypothetical example.

So, what does that lonely missed $1000 turn into?

Over $28,000*.

Now we are not suggesting that a mere $28,000 will be the tipping point between a comfortable retirement and financial misery.  But why miss out on that extra cash if you don’t have to?

And what if that oversight happened more than once?  Think about it… it’s easy enough to miss. 

To be clear, we are not advancing this singular action of max-funding your TSP as a make-or-break secret of success in retirement planning. This tactic is simply part of a larger behavioral success plan commonly known as habit-stacking, and the effective implementation of multiple habits over time can lead to life-changing results. 

Do you already set reminders for important activities, events, and commitments?  Do you add birthdays and anniversaries to your calendar?  If you answered yes, you are already part of the way there.  Let’s borrow and build upon those habits and recruit them to help build a comfortable retirement.

Begin this year for your January Jump and set yourself up for success: 

  1. Create a calendar reminder for early-December to confirm the new TSP contribution increase—remember to check for BOTH regular contribution limit and catch-up contribution limit increases. 
  2. Set a second reminder for mid-December to set up your new contributions, according to the new limits.
  3. Make it so.

By stacking the intentional step for tending to TSP on top of your normal habit of setting reminders for personal dates, you are creating a workable action plan to make sure you are always maximizing your TSP contributions in the timeliest way.

Alright. Time to address the elephant in the room:  What if you are not contributing the maximum to TSP? If I’m not contributing the maximum, then the increase in the maximum doesn’t really matter, right?

Wrong.  Even if you are not max-funding, you can use the habit-stacking approach to your advantage.

In our financial planning work with clients here at STWS, we stress progress, not perfection.  Maybe you are just starting in federal service and money is tight. Maybe you’ve been digging your way out of student loans. Maybe you have kids and all of your money seems to just evaporate into thin air every month. Whatever the reason, we can take this one small step to improve your financial situation.

Let’s think this through.  Since the year 2000, most annual increases to the TSP maximum contribution limits have been either $500 or $1000 annually.  (The one exception being the year 2023, when the increase jumped $2000, from $20,500 to $22,500.)  So, let’s take an average of $750 per increase.  Over 26 pay periods, that works out to $28.85 per paycheck, or roughly $14.42 per week. Don’t worry—we’re not going to roll out the tired old comparisons showing that a caramel macchiato is $6.50. Instead, let’s simply consider asking this question: Do you think you would painfully miss $14 a week?  If the answer is no, then you have your first step and first stacked habit leading to reaching the maximum TSP contribution.

Plan to do your January jump every year until you reach the maximum contribution.  Take one small definitive step in the right direction, and you begin the journey to your desired outcome. The January Jump represents one straightforward, intentional habit that everyone can deploy.  

If you are already doing this, bravo.  Stay tuned for more actionable habits you can implement!   

If this is a first step for you… take it, and watch the benefits compound over time. 

Want a back-up to be sure you don’t miss your January Jump?  

Be sure to subscribe to our Weekly Serving newsletter and bookmark our website for reminders.

If the habit-stacking idea interests you and you’d like to know more;  check out Atomic Habits by James Clear. It’s one of our favorite books and as the author so eloquently writes “All big things come from small beginnings. The seed of every habit is a single, tiny decision. But as that decision is repeated, a habit sprouts and grows.”

Baby steps work.  That’s why babies use ‘em.  

Until next time.

Check out our webinars for federal employees!

*This is a hypothetical illustration and is not intended to reflect the actual performance of any particular security. Future performance cannot be guaranteed and investment yields will fluctuate with market conditions

**Written by Dan Sipe. The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Dan Sipe and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. 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.

Health Savings Account Contribution Limits for 2025 - piggy bank

Health Savings Account Contribution Limits for 2025