If you're thinking big with your retirement savings, you need to use multiple qualified plans to maximize your annual contributions. If you work for the government, you can contribute to both a thrift savings plan and an individual retirement account without incurring excess contribution penalties.
Your contributions to an IRA don't affect your eligibility to contribute to a TSP. As long as you are working for the government, you can continue to elect to have money withheld from your paycheck and put into either a traditional or Roth TSP. With a traditional TSP, the contributions decrease your taxable income for that year but count as taxable income when you take money out. With a Roth TSP, you don't get a tax deduction for contributions, but your qualified distributions come out tax-free.
Traditional IRA Contributions
As long you won't turn 70 1/2 years old before the end of the year and you have compensation, you can contribute to a traditional IRA. However, if you participate in a TSP, you can't deduct your traditional IRA contribution if your modified adjusted gross income is too high. The income limits depend on your filing status, so if you file a joint return with your spouse, you'll have a higher limit than if you're single. However, the limit is very low if you're married filing jointly.
Roth IRA Contributions
Your contributions to a TSP won't affect your ability to contribute to a Roth IRA, but that doesn't mean you're eligible. To contribute to a Roth IRA, your modified adjusted gross income must not exceed the limits for your tax filing status. If it does, you can't contribute. In fact, if you make contributions to a traditional TSP, your modified adjusted gross income will be decreased by the amount of the contribution, which could be the difference being eligible to contribute to a Roth IRA and missing out.
As of 2012, the contribution limit for TSPs is $17,000 and the limit is $5,000 for IRAs. If you're 50 or older, the limits increase to $22,500 for TSPs and $6,000 for IRAs. The contribution limits don't overlap between TSPs and IRAs. As a result, each dollar that you contribute to a TSP doesn't reduce the contribution limit for IRAs. However, the limits are cumulative between Roth and traditional TSPs and Roth and traditional IRAs. Each dollar that you contribute to a Roth TSP decreases the amount you can contribute to a traditional TSP, but not to either a Roth IRA or traditional IRA.
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."