What makes a Roth TSP different from a Roth IRA? This answer used to be twofold, with the biggest differences pertaining to income limitations and required minimum distributions (RMDs). Unlike a Roth IRA, a federal employee can contribute to a Roth TSP without worrying about income limits. And up until last year, RMDs were required for the Roth TSP but not Roth IRAs. This is no longer the case. Also, thanks to the SECURE Act 2.0, there are two other significant changes to the rules for TSP contributions that you should keep an eye on ā€“ one is already in effect, and the other starts on January 1, 2026.
Have Questions About Federal Employee Retirement Benefits?
No More RMDs for Roth Accounts in the Thrift Savings Plan
A lot of positive changes have arrived or are on the horizon for Roth TSP accounts. One of the biggest is the removal of distribution requirements as of tax year 2024. The reason for RMDs from Roth accounts most likely revolved around the fact that withdrawals had to be taken pro rata from Roth and Traditional sides of the TSP account in the past, if a participant had funds in both. Although withdrawals still must be taken proportionately from whatever funds the account owner is invested in (G, F, C, S, I, and MFW funds), they can at least now specify how much of a distribution they would like to take from traditional money and how much from Roth (if any). This allows more of their retirement savings to grow tax-free and offers flexibility when strategically planning TSP withdrawals to minimize the tax liability.
Need qualified help with assiting federal employees with retirement?
Try the Federal Benefits Basics Online Course! Click to Learn More
Catch-Up Contributions to Roth TSP Starting in 2026
A significant change that will begin at the start of next year, thanks to the SECURE Act 2.0, is a requirement that all catch-up contributions will have to be made post-tax to a Roth TSP account if an employeeā€™s earned income from their job for the federal government is above a certain limit: $145,000 annually. If married filing jointly, the spouseā€™s income will not be considered, nor will any other taxable income the federal employee earns from outside of their federal salary. So, if a federal employeeā€™s AGI exceeds $145,000 but only $99,000 was from their government job, then they can still put catch-up contributions into their Traditional TSP should they choose. (Remember: all government matching contributions are required to be placed in the traditional side of the TSP.)
Already In Effect: Increased Catch-Up Amounts for TSP
Not directly related to the Roth TSP, but still pertaining to catch-up contributions, federal employees who will be ages 60 to 63 in 2025 can deposit a considerable amount more into their Thrift Savings Plan investments. Also, because of the SECURE Act 2.0, federal employees within this age range can contribute up to $11,250 more to their TSP. If at least age 50, the standard TSP catch-up contribution limit is $7,500 for 2025. All TSP contributions can put in a maximum contribution of $23,500 this year, meaning those between ages 60 and 63 can put in a total of $34,750 for the whole year. (Reminder: At least 5% of their gross pay must be contributed each paycheck in order to receive the full government match. Thus, it is wise not to front-load your TSP contributions in the beginning of the year.)
Refresher: What is the Roth TSP?
The Roth Thrift Savings Plan (TSP) is a retirement savings option available to federal employees and members of the uniformed services. It allows participants to contribute after-tax dollars to their retirement plan. Like a Roth IRA, the key advantage of the Roth TSP is that qualified withdrawals, including both contributions and earnings, are tax-free during retirement, provided certain conditions are met (e.g., the account has been open for at least five years, and the participant is at least 59Ā½ years old).
Responses