As we ring in the New Year, some changes are afoot regarding the critical figures for TSP. For federal employees in 2023, there are two new investment maximums: the standard limit and the “elective deferral limit.” The legal limit is going up by $2,000 to $22,500, while the catch-up contribution limit will increase by $1,000 to $7,500. For those eligible to make catch-up contributions, any investments beyond the standard limit will automatically be designated as catch-up contributions. Keep these changes in mind as you continue contributing to your TSP account throughout 2023!
â€ËœStandard Limit’ vs â€ËœCatch-Up Contribution’
One of the most important things to know about TSP is the difference between the standard and catch-up contribution limits. The standard limit is the maximum amount you can invest in a year, regardless of age. On the other hand, the catch-up contribution limit is for people aged 50 or older. You’re allowed to invest an additional amount each year on top of the standard limit.
How to Calculate the Maximum Amounts for TSP Investment in 2023
To calculate how much you can invest in your TSP account for 2023, simply add the standard and catch-up limits together. So if you are eligible for catch-up contributions and plan to support the maximum amount each year, your total investment for 2023 will be $30,000 ($22,500 + $7,500).
Spillover Contributions
Spillover contributions are investments beyond the standard limit and are automatically designated as catch-up contributions up to the limit. These spillovers are helpful to those who have exceeded their standard limit but still want to save more for retirement. It can be achieved by taking advantage of the additional $1,000 allowance in 2023, up from the $6,500 allowed in 2022.
Employees covered by FERS should be aware that to get the maximum government contributions, they must speed up their investment so that they may put away at least 5% of their annual salary in each yearly pay period. If they reach their cap before then their investments and agency-matching contributions will stop. However, the automatic 1% agency contribution will remain.
It should also be considered that 2023 is one of the few years with 27 pay periods, as opposed to the more common 26. Furthermore, the recently adopted fiscal year-end budget package increases the age limit from 72 to 73, beginning with those turning 73 in calendar 2023. It’s the age at which retirees must draw certain minimum payouts from the TSP.
Conclusion
In short, the new year changes key figures for TSP, including investment maximums. For those eligible to make catch-up contributions, the new year offers the opportunity to invest even more for retirement. Be sure to review the changes and determine if they impact you so that you can make the most of your TSP contributions in 2023.
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