January 3, 2023

Changes to the TSP: Are You Ready for 2023?

With the new year comes a few important changes to the TSP—and understanding them will help you maximize your savings. Here’s what you need to know.

New TSP Contribution Limits

Because the TSP is a tax-advantaged retirement account, there are limits to how much you can contribute each year—the government still wants you to pay some taxes, after all! The good news is that the amount you can contribute has increased for 2023:

  • Annual Elective Deferral: $22,500
  • Catch-up Contributions: $7,500

Your annual elective deferral is the total amount you can contribute to your TSP for the year. This number is the combination of investments you make to a traditional TSP or a Roth TSP. You can do either or split your contributions, but the total cannot amount to more than $22,500 for the year.

Catch-up contributions are only available for people age 50 or older. You get to put an extra $7,500 into your TSP each year to give yourself a boost as you get closer to retirement. Again, this is the total across traditional and Roth contributions. Once you max out your annual deferral, the extra will automatically count as a catch-up contribution.

Pro Tip: Contribute at least what you need to in order to get your matching benefit, but do more if you can. Even a 1% increase in your contributions each year will make a difference.

Updated TSP Investment Options

When’s the last time you thought about how the money in your TSP was invested? There are five core funds, plus several Lifecycle Funds to choose from:

    • I fund: A high-risk, international stock index fund 
    • S fund: A medium-high risk, total U.S. stock market index fund
    • C fund: A medium risk, S&P 500 stock index fund 
    • F fund: A low-medium risk, broad U.S. bond index fund
    • G fund: A low risk, short-term government bond index fund
  • L fund: Age-based funds with a custom mix of core funds to become less risky as you near retirement. 

(More information can be found on the investment options at: TSP Funds)

Over time, L funds change, and new ones are added as younger employees enter service. 

The other big change? You now have the option to invest in additional mutual funds through the new TSP Mutual Fund Window. If you’re interested in broadening your options, this can be a great choice. But buyer beware: many mutual funds have additional fees and expenses. 

The Bottom Line

If you haven’t reviewed your TSP investments lately, it’s time to take another look! You can get this year off to a great start by increasing your contributions and reviewing your TSP funds to make sure they are the right balance of risk and reward for your situation. 

Not sure where to start? Call us! We’d love to help.