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.
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