2026 TSP Contribution Limits

11.21.25: Audio automatically transcribed by Sonix

11.21.25: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Speaker1:
Welcome back to the Federal retirement Show. I'm your host, Val Majewski with American Benefits Exchange. And as always, really appreciate you taking the time out of your busy schedule to join us to view our content. That's what it's here for. It's for you, the federal employee who's looking for accurate information when it comes to your benefits and retirement situations. And before we get started and dive into today's topic and, uh, and share with you what we're talking about today. Uh, I just want to encourage you, if you like our content, please, uh, be sure to subscribe. Make sure you get notified when a new episode comes out. Go back and view all of our other episodes. We have over 150 of them. And do me a favor, share this with a colleague. Right. There are federal employees out there that need to know this information, that don't know where to look, don't know where to turn, or who to turn to to get answers to their questions. That's what we're here for. So share this with a friend whether it's you're listening to it on YouTube, SoundCloud, Spotify, Apple Podcasts, or you stumbled upon our website, Federal Retirement Show.com. We really appreciate the referral to a colleague. And again, that's what we're here for. And if for some reason you do not see your question answered in any of the episodes or any of the content that we currently have, reach out to us.

Speaker1:
I mentioned the website, but it's Federal retirement Show.com fill out the form, submit your request, let us know what we can be talking about in the future that we have not touched on yet. There are a lot of things that federal employees have questions about. We want to make sure we're getting to the bottom of most of those things, or as many of them as we possibly can with the time that we have allotted. So thank you for that in advance. Now, today's topic is about, uh, the TSP contribution limits and how they're being increased in 2026. And this goes for 401 s in general, but the TSP specifically one of your three main retirement income sources and one of the the retirement income sources that you're going to probably be relying the heaviest on when it comes to your pension, Social Security, and TSP. Tsp usually carries the most amount of weight. Now why is that? That's because your pension and your Social Security payments are pretty much fixed. There's not much you can do about that. If you've watched our episodes, you've seen us talk about that before, where we say the only way you can really affect your pension is to try to earn more money. So your high three goes up and work longer so you have a greater payout factor when it comes to years of service.

Speaker1:
Now, if those things are, some of those things are out of your control, I should say where you can't always determine how much you're going to make, even though you're trying to make as much money as you can, and you may not want to work longer than you desire. So those things are kind of fixed. And the same with Social Security. You really can't affect the amount of Social Security you're going to get other than try to earn more money so that your Social Security deduction is a little higher. Therefore your payment is going to be greater. And and also wait longer to take Social Security. But most federal employees that I talked to need to take Social Security right when they retire. So waiting to let that money grow is not necessarily an option. And if you did not take Social Security right away, even more of a reason why TSP is going to carry a bigger wait. Now let's look at an example, uh, just relatively speaking. Right. Let's say, uh, your high three is $100,000 when you retire and you work 30 years. That's a very long career. That's a great career. You work 30 years and let's say you retire at age 65, so you're beyond the age of 62, and you get this little extra payout factor when it comes to your pension.

Speaker1:
If you don't know what I'm talking about, I've done an episode when we talk about retiring at 60 versus 62, or waiting until 62 to retire, you can see what I mean by that extra payout factor. But in this example you have $100,000 high. Three. The factor we're going to use is 1.1% times 30 years of service. So you're going to make in your pension about $33,000 a year. Okay. Let's say $33,000 a year is your pension. That's 33% of your pre-retirement income. Social security is normally going to carry an extra, uh, let's say 2000 a month. So that could be 24,000 a year. If you're at age 65, maybe it's more than that. So that's an extra 24%. So if we're at 33% plus 24%, we're at 47% of your pre-retirement income. The rest of that is going to be made up by TSP. So like I said, if we're at 47%, we're trying to get back to 100. That leaves TSP to cover the extra 53%. And even if you only wanted to get to 90% of your pre-retirement income, now we're at TSP left to pick up 37%, which is still the bulk of the retirement income. So that's why understanding how much you can put into TSP is important, because it's going to carry the most amount of weight, and you want to make sure that you're taking advantage of everything the government gives you when it comes to TSB.

Speaker1:
So you can build up a retirement nest egg that you can utilize for income in retirement. Now, if you're one of those better employees, that doesn't look like they're going to need their TSP for income and retirement, great for you. That is awesome. But most that I talk to and most of the reviews that I do, those federal employees are needing requiring TSP to be one of their three retirement income sources. So I'm speaking to those that really needed to be a retirement income source. Now, it's important to get a benefits and retirement review done so you can see if you're on track and if you need to take advantage of these new contribution limits and put more towards TSP as you go. Now that means you can take advantage of the maximums that they give you, plus any of these catch up contributions that are allowed. So just understand before we get into the contribution limits. You need to get a Benefits of retirement review done, so you can see if you're on track for your retirement income that you desire, and also just get all of your other questions answered so you can prepare as much as possible for that future day. When you walk out with your head held high. And I say this all the time so you can retire how you want, when you want, with the lifestyle that you want, and not have to decrease the way you live in retirement.

Speaker1:
You've worked all these years. Retirement should be the reward. It should be the the icing on the cake, the pot of gold at the end of the rainbow. Because you've you've prepared properly, not something that looks as as a detriment. Saying you're going to have to decrease your lifestyle or downsize because you're not making as much money. So how did TSP or how did the government, the IRS, increase these contribution limits going into 2026? First of all, the current limit is 23,500 per year into TSP. For those that are under the age of 50, they are increasing that by $1,000. So now your new contribution limit for those that are under 50 into TSP is going to be $24,500 per year. They're still going to match up to 5%, but the most that you can put in is 24,500. Catch up contributions are going to increase from 7500 to $8000 a year. Now those are for people that are 50 and older. Once you've hit the max, you can put an additional catch up. Contributions to lump sum catch up contributions into your TSP. Now that goes up to 8000. So it's up $500. That increases your total contribution limit for those that are 50 and older to $32,500 per year.

Speaker1:
Now, you may have remembered when we went over the contribution limits starting in 2025, there was this new super catch up contribution for those that are between the ages of 60 and 63, that is still remaining level at $11,250. So for those that are in between age 60 and 63, your limit is 24,000 per year, plus the super catch up amount of 11,250, which brings your total that you can contribute for the year to $35,750. So understand the maximums that you can contribute in order to take advantage of what the TSP has to offer. Now you can still move that money around, put it into whatever investment strategies you want desire, depending upon your risk tolerance. But the idea is if you realize, hey, I need TSP to do something more for me in retirement, well, that money doesn't just show up magically. You have to decide to put that money in there. Because again, TSP is your wild card. You decide how much you put in. You decide where those investments go. And if you're not, at least I go back to my original advice that I give to most federal employees 99.9%. If you're not putting in at least 5% into your TSP. I highly recommend doing so. Again, my opinion on that because the government matches up to 5%. That's free money that you're missing out on if you're not putting in at least 5% now to go above and beyond.

Speaker1:
Yes, these are the limits that we just mentioned, and that's the most that you can put in to your TSP account. Now, once you've hit the max and maybe you said I need to create another income stream, I need to create another source of income, another retirement savings account. What else can you do? Well, the IRA limits set by the IRS are also increasing. So the IRA, which is a traditional IRA or Roth IRA, used to be $7,000 per year that you can put in. That is increasing to $7,500 per year that you can put into an outside traditional IRA and or a Roth IRA. Now, the other side of that is the catch up contribution for an IRA. For those that are 50 and older is increasing from $1,000 to 1100. So not much of an increase there. But the catch up for those that are 50 and older, you can put an additional 1100 in. So your total now is up to 8600 per year that you can put into your traditional or Roth IRA. Now, which one is more beneficial for you? I'm a believer in and I prefer tax free income sources, so I'm a big fan of Roth dollars or tax free sources of income in retirement. What's right for you? That's your preference? I'm just giving you my personal preference.

Speaker1:
Doesn't mean that that's what you have to do. But if you want to go over the pros and cons of either one, certainly we'd love to talk to you. By scheduling that Benefits of Retirement review, go to our website and fill out the form. I'll remind you it's federal retirement show and one of our experts across the country. If it's not me personally, we'll be reaching out to review your benefits and retirement estimates to ensure that you're on the right track. Right. We'll give you a couple of different reports with all of your personalized information on it and numbers, so you can see where you currently stand and how you're trending or tracking as you get closer and closer to retirement. Pretty awesome stuff, if you ask me. Something I think every federal employee should do. In fact, I wrote a pamphlet called The Top Ten Mistakes Federal Employees Make. And that is the biggest mistake that I see federal employees make is never getting a personalized benefits and retirement review done at any point during their career. Just assuming that everything's going to work out, that's like never going to the doctor and it's just assuming you're in good health, right? I use that analogy a lot, but you're not going to just assume you're in good health. You want to get a pat on the back.

Speaker1:
You want to get a checkup, you want to get all your numbers done so you can see that you're in range, right? There's nothing that's alarming, nothing that's out of range, nothing. That's a red flag. Same thing here. With your benefits and retirement situation, we want to ensure that everything is green. Right. Give you the pat on the back, tell you you're doing a good job. Keep it up. You're on track for retirement. So again with this TSP and these new contribution limits, understand how much more you can put into your account each year. And generally speaking they've been increasing these as we go on. So hopefully when we talk about what's coming up in 2027, we'll also see some more increases. They're just giving you more and more opportunities to properly fund your retirement and catch up if you're not on the right pace, right? If you're not on the right track. Because retirement is not something you can just cram for at the last minute, I understand there's catch up contributions and there's things that you can do, but it's not something you can just cram for at the last minute. Like this is some kind of exam you took, you know, in in high school. This is something you have to prepare for. And it takes time and effort and it takes a commitment and diligence, um, and a really disciplined effort to prepare properly for retirement.

Speaker1:
But if you find out that you're not and take advantage for or not on track, I mean, take advantage of everything the government's giving you, including these increased limits to properly fund your retirement. So, as I said, we've got over 150 episodes now of the federal retirement show. I highly recommend that you go back and view all of our content to see if there's other questions that we can answer for you. If there's questions that we have not answered, I remind you, go to our website, fill out the form, ask the question, reach out to us and we'll have another episode at some point in the future talking about your question, because if it if it helps you, chances are it's going to help other federal employees out there. And I highly recommend, if you're not already subscribed or liking or getting notified that a new episode is coming out, please do so. And please. This is not a plea, but I'm just saying there's other federal employees that need assistance. Refer this show, share this show with a friend and a colleague. Um, you're only going to be helping them prepare better and plan better for their future. So thank you for listening. My name again is Val Majewski, and you've been watching the federal retirement Show and look forward to seeing you on a future episode.

Speaker2:
His retirement just around the corner. It might be time to start imagining the foundation of your retirement budget. I'm Jim Tabaka here for the Retirement radio network powered by Amara Life. Most people spend decades saving for retirement, but far fewer spend time planning how they'll spend in retirement, according to a recent study by CNBC. 64% of Americans are more worried about running out of money in retirement than they are of actually dying. Andrew Biggs, senior fellow at the American Enterprise Institute, tells CNBC that growing fears about retirement finances are pushing more Americans to keep working later in life.

Speaker3:
We have more options for extended work lives today than we've ever had before, and Americans are taking advantage of them.

Speaker2:
Without a clear retirement budget, it's easy to go off track either by spending too much too soon, or holding back out of fear and missing out on the freedom you've earned. At a recent Ted talk, award winning financial planner Amir Rocha-lima revealed how true freedom and retirement budgeting go hand in hand.

Speaker4:
Yes, you need to know your numbers, but knowing how much you need to ensure your dream retirement becomes a reality is completely intertwined with knowing what your dream retirement looks like in the first place.

Speaker2:
To help keep your retirement years both secure and fulfilling. Here are four tips for navigating your budget. First, get clear on your monthly must haves. We're talking about essentials. Housing. Healthcare. Groceries. Transportation. Next, think about what makes retirement meaningful for you. Travel. Picking up a new hobby. Helping the grandkids with college. This is your time. But even purpose has a price tag. Then take a close look at your income sources. Social security. Pensions. Investment. Withdrawals. Each comes with its own set of rules and tax impacts. And finally, check in with your budget every year. Life changes. The markets they shift, your priorities might too. A little regular review can go a long way in keeping you confident and in control. Retirement budgeting isn't a set it and forget it moment. No, it's a new chapter, and like any good story, it needs a solid outline for the Retirement Radio network powered by a mirror life. I'm Jim Tabaka.

Sonix is the world’s most advanced automated transcription, translation, and subtitling platform. Fast, accurate, and affordable.

Automatically convert your mp3 files to text (txt file), Microsoft Word (docx file), and SubRip Subtitle (srt file) in minutes.

Sonix has many features that you'd love including powerful integrations and APIs, generate automated summaries powered by AI, transcribe multiple languages, enterprise-grade admin tools, and easily transcribe your Zoom meetings. Try Sonix for free today.