The Thrift Savings Board announced that the 2009 employee contribution limit for the Thrift Savings Plan has been increased from $15,500 in 2008 to $16,500 in 2009. If you are over age 50, you will be eligible for catch-up contributions of an additional $5,500, for a total contribution of $22,000. These changes correspond to the new contribution limits for 401(k) plans which are available for many civilians.

How to maximize your Thrift Savings Plan Contributions in 2009

There are 26 pay dates in 2009. If you wish to divide your contributions evenly throughout the year,you will need to divide the maximum contribution limit of $16,500 by your salary. The percentage you get as your answer is how much you will need to contribute per pay period to maximize your contributions. If you are eligible for catch-up contributions, divide the maximum catch-up contribution limit of $22,000 by your salary.

Thrift Savings Plan Changes for 2009

Be careful how much you contribute to your TSP! Before deciding the percentage or dollar amount you wish to contribute each pay period, be sure not to contribute more to your TSP than your paycheck after taxes, deductions, and other withdrawals.

Contributing by percentage. If you elect to contribute a percentage of pay to the TSP and the amount is more than your remaining salary after mandatory deductions (e.g. Federal income tax, state taxes, TSP loan payments, etc.) and other voluntary deductions that are processed before TSP contributions, then the resulting pay will be the amount withheld and contributed to your TSP account.

Contributing by dollar amount. If you designate a whole dollar amount that is greater than your remaining salary, then no employee contributions will be made for that pay period, and if you are FERS you will not receive Agency Matching Contributions for that pay period. If this occurs, you will need tolower your contribution level by electing to contribute either a lower percentage or dollar amount. No TSP contributions will be withheld from your pay until your new election is effective. Neither the new election or any matching contributions will be applied retroactively.

This article was included in the  Carnival of Personal Finance No. 188: The Jane Austen Edition.

Related posts:

  1. 2009 TSP Contribution Limits
  2. 2009 Retirement Plan Contribution Limits
  3. What is the Thrift Savings Plan?
  4. Benefits of Investing in the Thrift Savings Plan
  5. Disadvantages to Investing in the Thrift Savings Plan