On November 1, 2024, the Internal Revenue Service released the 2025 retirement plan contribution limits and other key numbers for investment accounts. While contribution limits for employer sponsored plans like the Thrift Savings Plan (TSP) are increasing in 2025, IRA contributions will remain the same as 2024. The increasingly popular tax-free Health Savings Account contribution limits are also increasing in 2025. For the first time, TSP participants turning age 60, 61, 62, or 63 in 2025 will be able to make even larger catch-up contributions thanks to the SECURE Act 2.0.

Here’s the breakdown.

TSP & other employer sponsored plans (401(k), 403(b), 457(b))

TSP (under age 50): $23,500 ($904 per pay period). Yes, $904 (x) 26 = $23,504, but TSP will adjust the 26th contribution to ensure you don’t exceed $23,500.

TSP (age 50+): $31,000 ($1,193 per pay period) – this amount includes a $7,500 catch-up for those who will be age 50 at the end of 2025. You do not have to be age 50 on January 1st. $1,193 (x) 26 pay periods is over $31,018, but TSP will adjust the 26th contribution to ensure you don’t exceed $31,000.

TSP (age 60-63): $34,750 ($1,337 per pay period) – the math: $23,500 regular + the new additional catch-up which is the greater of either (1) $10,000 OR (2) 150% of the regular age 50+ catch-up amount which is $7,500. Therefore 150% of $7,500 (regular catch-up) = $11,250.

From TSP Bulletin 23-1: “Beginning on January 1, 2025, the catch-up contribution limit for participants ages 60-63 will be increased to the greater of (1) $10,000 or (2) 50% more than the regular catch-up amount in 2025.” This applies to anyone turning age 60, 61, 62, or 63 in the calendar year.

Income Limits
There are NO income limits for Roth TSP contributions.

There ARE income limits for Roth IRA contributions. See below for more on IRAs.

Catch-Up Contributions DO NOT have to be Roth…yet
Section 603 of SECURE Act 2.0 will require catch-up contributions to be Roth if your wages in the prior tax year are above a certain threshold (originally set at $145,000, which will be adjusted for inflation annually). Implementation of Section 603 has been POSTPONED until 1/1/2026. From TSP Bulletin 23-5: “Catch-up contributions that would otherwise be required to be made on a Roth basis in accordance with § 603, can continue to be made on a traditional (pre-tax) basis until the provision is implemented for the Thrift Savings Plan (TSP).”

When to Make the Changes for TSP

You want these new contributions to be reflected in the first paycheck you receive in calendar year 2025, which for most is not the first pay period of 2025. To do this, make your changes so that they are “effective” in PP25, which is from 12/15-12/28. You can go into Employee Express and select any effective date 90-days out. If you submit the change in PP24, it will become “effective” on the first day of PP25, and will be paid 1/9/25 (first paycheck in calendar year 2025). Note: Your agency pay periods and payroll processors may differ. Check with your agency for proper implementation.

TSP Match

If you contribute 5% of your basic pay, you’ll get a 5% match – free money! The 5% total match consists of 1% agency automatic contribution + 4% agency matching.

Do not max-out your $23,500/$31,000 elective deferral early. If you hit this limit before the end of the year, you’ll only get the 1% Agency Automatic contribution and miss out on the other 4%.

The employer match DOES NOT count against the $23,500/$31,000 elective deferral amount you’re allowed to contribute.

Regardless of whether you contribute your portion towards Roth TSP or traditional TSP, you WILL still get the employer match. As of now, your matching contributions will go into the traditional TSP bucket.

Individual Retirement Arrangement (IRA)/ “Individual Retirement Account”

An important distinction federal employees need to know is that an IRA is completely separate from their TSP. The TSP is an employer plan with its own set of rules. An IRA is a tax-advantaged retirement account that anyone can open on their own. An IRA can be opened at any low-cost custodian like Vanguard, Fidelity, or Schwab (examples, not advice).

2025 Contribution Limits
IRA (under age 50): $7,000
IRA (age 50+): $8,000 – if you will be age 50 at the end of the calendar year

This contribution limit is across all of your IRAs. The IRS views your IRAs as one giant bucket, regardless of how many accounts you have, which custodians you use, or the tax treatment you choose (Roth vs traditional).

For example, if you’re under age 50 and want to invest $7,000 in 2025, you could technically do this.

Vanguard Traditional IRA: $1,000 contribution

Fidelity Roth IRA: $2,000 contribution

Schwab Traditional IRA: $1,000 contribution

Robo Advisor Traditional IRA: $1,000 contribution

Big Bank Roth IRA: $2,000 contribution

= $7,000 dollars went into your total IRA bucket.

Again, there ARE income limits for Roth IRA contributions. There ARE NOT income limits for Roth TSP contributions.

Roth IRA Income Limits
There is an income phase-out for the ability to make Roth IRA contributions. In 2025, the phase-out range for contributions to a Roth IRA is between $150,000 and $165,000 (Single/Head of Household), and between $236,000 and $246,000 (Married Filing Joint). The phase-out range for those who file Married Filing Separate remains between $0 and $10,000.

If your income makes you ineligible from making a regular Roth IRA contribution, the “backdoor Roth IRA” method may be a solution for you.

Traditional IRA & Deductibility
You may be able to deduct your Traditional IRA contributions (reducing your taxable income). Your ability to deduct traditional IRA contributions depends on two things: (1) were you and/or your spouse covered by a retirement plan at work, and (2) your Modified Adjusted Gross Income (MAGI).

If you file Single or Head of Household and you ARE covered by a workplace retirement plan, you can only deduct a portion of your traditional IRA contribution once your MAGI is between $79,000 and $89,000. Once you’re over that limit, none of your contribution is deductible. Remember, you can still make a full traditional IRA contribution, but it will need to be treated and tracked as a non-deductible contribution.

If you file Married Filing Joint and YOU ARE covered by a workplace retirement plan, you can only deduct a portion of your traditional IRA contribution once your MAGI is between $126,000 and $146,000. Once you’re over that limit, none of your contribution is deductible.

If you file Married Filing Joint and YOU ARE NOT covered by a workplace retirement plan, but your SPOUSE IS covered by a workplace retirement plan, you can only deduct a portion of your traditional IRA contribution once your MAGI is between 236,000 and $246,000. Once you’re over that limit, none of your contribution is deductible.

If you file Married Filing Separate and you ARE covered by a workplace retirement plan, you can only deduct a portion of your traditional IRA contribution when your MAGI is $0 and $10,000. Once you’re over that limit, none of your contribution is deductible.

If NEITHER you nor your spouse are covered by a workplace retirement plan, you can take a deduction regardless of your MAGI.

Health Savings Accounts (HSA)
Note: The amount you can contribute is based on your HDHP coverage (self-only vs. self plus one & family). Also, this amount is reduced by the premium pass-through ($1,000 self/$2,000 family for FEHB GEHA HDHP). The premium pass-through is a portion of your premium that gets deposited back in your HSA.

HSA Self-Only (under age 55): $4,300 minus the premium pass-through amount = your total contribution

HSA Self-Only (age 55+): $5,300 minus the premium pass-through amount = your total contribution

HSA Self Plus One & Family (under age 55): $8,550 minus the premium pass-through amount = your total contribution

HSA Self Plus One & Family (age 55+): $9,550 minus the premium pass-through amount = your total contribution

IMPORTANT: You must know the eligibility rules for contributing towards an HSA before opening the account and making a contribution. Learn more about HSAs here.

Tyler Weerden, CFE is a financial planner and the owner of Layered Financial, a Registered Investment Advisory firm. In addition to being a financial planner, Tyler is a full-time federal agent with 15 years of law enforcement experience on the local, state, and federal level. He has served in both domestic and overseas Foreign Service assignments. Tyler has experience with local, state, and federal pension systems, 457(b) Deferred Compensation, the federal Thrift Savings Plan (TSP), Individual Retirement Arrangements (IRAs), Health Savings Accounts (HSAs), and invests in rental real estate. He holds a Bachelor of Science degree, a Master of Science degree, passed the Series 65 exam, and is a Certified Fraud Examiner (CFE).

 

 

 

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