Can I Invest in a TSP & IRA at the Same Time?

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If you work for the federal government or you're in the military, you're probably eligible to participate in the Thrift Savings Plan (TSP). The TSP is a special retirement plan that's available only to government employees. This type of plan allows you to sock away cash through elective deferrals and employer matching contributions. If you're looking to supplement your TSP savings, you may also be able to contribute to a traditional or Roth IRA.

TSP Eligibility

Most federal employees can participate in the Thrift Savings Plan. Generally, you can contribute if you're covered by an eligible retirement system as a civilian employee, you're a member of the armed services or you're employed as a civilian in certain other categories of government service. Eligible retirement systems include the Federal Employees' Retirement System and the Civil Service Retirement System. In addition to meeting these general requirements you'll also need to be in pay status and working either part- or full-time. Employees who leave federal service and later return are automatically re-enrolled in the TSP when they're rehired.

Traditional IRA

Generally, you can sock away money in a traditional IRA as long as you've earned taxable income during the year and you're under age 70 1/2. You can still chip in money to your TSP while fully funding your traditional IRA, but you may not be able to deduct your contributions. Deductions are phased out once your modified adjusted gross income reaches a certain limit. For 2013, the AGI phase-out limit was $115,000 for married couples who are both covered by an employer's plan and file a joint return. When one spouse participates in the TSP but the other spouse isn't covered by a plan at work, the phaseout limit goes up to $188,000.

Roth IRA

There are no age limits on who can open a Roth IRA but there is a cap on contributions based on your income and filing status. For 2013, single filers could contribute to a TSP and a Roth IRA as long as their modified adjusted gross income was less than $127,000. For married couples, the phaseout limit was less than $188,000. Keep in mind that any money you put into a Roth IRA won't be tax-deductible, but qualified withdrawals are tax-free.

Contribution Limits

Both the Thrift Savings Plan and IRAs have limits on how much money you can kick in each year. As of 2013, you could save up to $17,500 in your TSP. If you're over age 50 you can chip in an extra $5,500. If you work for a government agency that matches contributions, the total combined limit on contributions was $51,000. For 2013, the limit on contributions to traditional and Roth IRAs was $5,500 or your total taxable compensation, whichever is less. You're allowed an extra $1,000 if you're over 50.

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