maximize TSP contributions in a combat zone

Submitted by Ron Rahall on Thu, 2015-07-23 17:34

Greetings,

Using both ROTH and Traditional Thrift Savings Plan (TSP)contributions, how do I maximize the elective deferral limit (18K) and annual addition Limit (53K) when in a combat zone (pay is tax-exempt).

I will be/have been in combat zone status for 7 months of CY2015.

r/rgr



Submitted by Alan - IRA critic on Thu, 2015-07-23 19:06

First, fill the 18k elective deferral limit using Roth TSP. Then contribute 5500 to a Roth IRA if your income permits. Finally, you could contribute any remaining combat pay up to 35k to the tax exempt sub account in the TSP to fill out the 53k annual additions limit. Of course, this depends on your total military income and liquidity needs and what other income you have if any, although you can use the Roth IRA contribution as an emergency fund. You will need to have some funds available that are not tied up in the TSP. And – thank you for your service!!

Submitted by Ron Rahall on Mon, 2015-08-03 17:01

thanks alan

Submitted by Robert Jarrett on Mon, 2016-07-11 16:47

In the above scenario, it sounds like you can contribute up to the “elective deferral” limit ($18K in 2016) to the TSP Roth and another $35K up to the “Additional Annual” limit PLUS $5.5K ($6.5K catch up) in one year, for a total of $58.5 orn$59.5K.  Is this correct or is the $53K the maximum including an “individual” Roth IRA?

Submitted by Alan - IRA critic on Tue, 2016-07-12 00:09

  • The Roth IRA limits are entirely separate, as long as modified AGI is not too high, and there is enough earned income. Combat zone income is tax exempt, but still counts as earned income for Roth IRA contribution purposes, so the Roth IRA contribution could be as high as 6,500.
  • The TSP contribution limit applications are complex. The 18k elective deferral limit can be applied in any combination between traditional and Roth. The 6,000 of catch up contributions can only be applied using non combat income as far as I can tell. The total TSP could max out at 59k if there is enough income of the correct type. In other words, additional contributions above 24k based on combat pay must go to the traditional portion of the TSP (same as an after tax employee contribution to a 401k) if non combat income has maxed out the 24k of elective deferral limits including the catch up.
  • Possible total max between the TSP and Roth IRA of 65,500 if all the parts fall into place.

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