Can You Have a 401(k) and a TSP?

Using a 401(k) and a TSP can help you grow your retirement savings.

Using a 401(k) and a TSP can help you grow your retirement savings.

Thrift savings plans are offered to federal employees while private, for-profit employers offer 401(k) plans. Both offer tax-sheltered growth for retirement savings and allow matching contributions from employers. You're allowed to have both a 401(k) and a TSP in the same year -- it possible if you work for both a government agency and a private employer.

Cumulative Limits

Both 401(k) plans and TSPs are considered defined contribution plans, which means you aren't guaranteed to receive a specific retirement benefit. Instead, you contribute specific dollar amounts in the account, but how much you get out at retirement depends on how well your investments performed. To prevent people from stashing away too much money, the IRS uses a cumulative contribution limit for all your 401(k)s and TSPs combined. This limit also includes other types of plans, such as 403(b) plans.

Contribution Limits

As of 2013, you're limited to putting in $17,500 in personal contributions to both plans combined. For example, you could put in $17,500 to your TSP and nothing to your 401(k), nothing in your TSP and $17,500 in your 401(k), or split the contributions between the two. Similarly, your total contributions -- including the contributions the government agency or your private employer makes on your behalf -- can't exceed $51,000 for the year.

Roth Accounts

Both 401(k) plans and TSPs can offer Roth options, where you put in after-tax dollars and then get your qualified distributions out tax-free, including the earnings. But, this isn't a way for you to stash more cash -- the contribution limits still apply. For example, say your contribution limit is $17,500. If you stick $12,000 in your Roth 401(k) plan and $5,500 in your Roth TSP, you're already at your limit and can't contribute to a traditional 401(k) or TSP without going over.

Penalties

If you exceed the contribution limits for your 401(k) and TSP, you must include any excess contributions in your taxable income that year. For example, say you contributed $5,000 more than you're allowed. You must add $5,000 to your taxable income. Plus, you still have to pay taxes on the money when you take it out at retirement -- essentially you have to pay taxes on the same money twice. To avoid this, you must request a distribution of the excess contributions before March 15 so your request will be processed before April 15.

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