Attention government employees: there’s a new retirement savings regulation on the horizon that could have a big impact on your financial future. In 2024, some federal workers will be required to make catch-up contributions exclusively to their Roth TSP accounts.
If you’re not familiar with the Roth TSP or what catch-up contributions entail, don’t worry – we’ve got you covered. In this guide, we’ll explain everything you need to know about this upcoming change and how it may affect your retirement plans.
So, sit back and get ready to level up your knowledge of federal benefits.
How will the Roth TSP Catch-Up Provision Affect Federal Employees?
This new change for 2024 will require all these contributions to be made only to Roth TSPs (Thrift Savings Plans). Read on to understand more about Roth TSPs and how this new regulation will impact your retirement savings strategy.
TSPs 101
TSPs are tax-advantaged retirement savings plans for federal employees and members of the uniformed services. You can make contributions to TSPs in two ways, either Traditional TSP contributions, where you don’t pay taxes now but your future distributions will be taxed, or Roth TSP contributions, where you pay tax on your contribution now and your future withdrawals will be tax-free.
- Note: In 2024, you will be able to make catch-up contributions solely to Roth TSPs, but not Traditional TSPs.
The Impact of This Change
- Upfront taxes: Since all catch-up contributions will go to Roth TSPs, you will need to pay taxes upfront on these retirement investments.
- Tax-free withdrawals: All of your catch-up contributions will grow tax-free and can be withdrawn tax-free during retirement.
- Extended tax benefits: By making catch-up contributions to Roth TSPs, you extend the benefits of tax-free withdrawals during retirement to more of your retirement savings.
- Modified retirement plan: With this change, you may need to modify your retirement savings plan to account for the upfront tax implications.
Preparation is key when it comes to maximizing your retirement benefits. It’s well worth taking the time now to familiarize yourself with these changes. This way, you’ll be ready to adjust and continue building your nest egg in the most efficient way possible when the new regulations take effect in 2024.
Lean on the Federal Educators
The new requirement to make catch-up contributions solely to Roth TSPs in 2024 presents a significant change for federal employees. Individuals must understand the implications of this change and consider how it aligns with their retirement goals and financial situation.
At The Federal Educators, our team is dedicated to helping federal employees navigate these complex retirement decisions. We offer expert advice and resources to educate individuals about their options and guide them toward making informed choices.
Contact us today at (813) 755-7037 to learn more about how we can assist you in planning for a secure and comfortable retirement. Don’t miss out on the opportunity to maximize your savings and ensure a prosperous future.
