TSP Annual Limits 2025

Understanding Annual Limits in the TSP for 2025

As a federal employee participating in the Thrift Savings Plan (TSP), it’s essential to understand the annual limits that apply to your account. These limits impact both your ability to contribute to your retirement savings and how you can withdraw funds once you’ve separated or are still actively employed. In 2025, several key updates influence your planning strategy—whether you’re trying to reach maximum savings thresholds or distribute your funds with tax efficiency.

2025 Contribution Limits

Each year, the Internal Revenue Service (IRS) updates the maximum contribution limits for retirement accounts such as the TSP. These limits are essential benchmarks to guide how much you can invest in your future on a tax-advantaged basis.

Elective Deferral Limit

The elective deferral limit for 2025 is $23,500. This is the amount of your own salary that you can contribute to your TSP. It applies to both traditional contributions (which reduce your taxable income today) and Roth contributions (which provide tax-free income in retirement). This limit is individual, meaning it applies regardless of how many jobs or TSP-eligible positions you hold throughout the year.

Catch-Up Contributions

For federal employees nearing retirement age, catch-up contributions offer an excellent way to accelerate savings in the final years of employment. These include:

Standard catch-up contribution: If you are age 50 or older at any point in the calendar year, you can contribute an additional $7,500, raising your total annual elective contribution to $31,000.
Super catch-up contribution: Federal employees aged 60 through 63 are eligible for an enhanced catch-up option introduced through SECURE Act 2.0. You may contribute an additional $11,250, which increases your total maximum contribution to $34,750 for the year.

Note that you can only use one catch-up type per year. If you are age 60 through 63 in 2025, you qualify for the super catch-up rather than the standard one.

Annual Additions Limit

Beyond what you contribute from your paycheck, the TSP also accounts for employer contributions. In 2025, the total annual additions limit—which includes your contributions, matching contributions from your agency, and other employer contributions—is $70,000. Hitting this limit typically applies only if you’re contributing the maximum and your agency provides full matching or additional amounts.

Contribution Scheduling and Payroll Deductions

To take full advantage of these limits, you must schedule your TSP payroll deductions appropriately. You can use a simple calculation to divide your intended annual contribution by the number of pay periods remaining in the year. This will help avoid overcontributing too early or undercontributing by year-end. If you change agencies, go on extended leave without pay, or receive a promotion, revisit your deductions and adjust accordingly.

Many employees aim to front-load their contributions early in the year. While this strategy can benefit compounding growth, be aware that your agency match will only occur when you make a contribution for that pay period. Missing out on regular pay-period contributions might reduce your total match.

TSP Withdrawal Rules and Frequency Limits

The TSP allows flexibility in accessing your retirement funds, but it also imposes rules around how often and under what conditions you can take money out. While there is no annual dollar limit on how much you can withdraw, there are restrictions related to frequency, type, and minimum amounts.

In-Service Withdrawals (While Still Employed)

You have limited access to your TSP funds while still in federal service. Two main types of in-service withdrawals exist:

Age-based withdrawals: Once you reach age 59½, you are permitted to take up to four age-based withdrawals per calendar year. Each withdrawal must be at least $1,000. These are not subject to the 10% early withdrawal penalty, but traditional withdrawals are taxable.
Financial hardship withdrawals: If you encounter serious financial need—such as uninsured medical bills, personal casualty losses, or proven negative cash flow—you may qualify for a hardship withdrawal. This option is limited to one withdrawal every 6 months, and the minimum withdrawal amount is $1,000.

Be mindful that hardship withdrawals are taxable and cannot be rolled over. They may also pause your ability to contribute temporarily, depending on plan policies.

Post-Separation Withdrawals (After Leaving Federal Service)

Once you separate from federal employment, your TSP becomes more accessible:

Partial withdrawals: You can take multiple withdrawals in a year, each for a minimum of $1,000, and separated by at least 30 days.
Installment payments: You may set up monthly, quarterly, or annual withdrawals to be delivered automatically. This method allows for cash flow consistency. You can change the amount or frequency, but updates must also be spaced 30 days apart.
Full withdrawal or rollover: You have the option to take your full balance as a lump sum, transfer it to another qualified retirement account, or use all or part of the balance to purchase a life annuity.

There is no cap on the dollar amount you can withdraw in a given year. However, the plan enforces spacing and minimum thresholds to maintain system integrity.

Tax Implications and Planning

Traditional TSP

Withdrawals from a traditional TSP account are taxed as ordinary income. If you retire at age 55 or later (or age 50 if you’re in a qualified public safety position), you can avoid the early withdrawal penalty. Otherwise, you’ll incur a 10% penalty on distributions made before age 59½, in addition to income tax.

Roth TSP

Qualified Roth TSP withdrawals are completely tax-free, but only if two conditions are met: (1) You are at least 59½ years old, and (2) Your first Roth contribution was made at least five years ago. If you withdraw Roth earnings before meeting these requirements, you could owe taxes and penalties on the earnings portion.

Required Minimum Distributions (RMDs)

RMDs apply beginning at age 73 if you turn 73 in 2025, or age 75 if born in 1960 or later. These mandatory annual distributions are based on your account balance and a life expectancy factor provided by the IRS. RMDs can be satisfied through installment payments or partial withdrawals.

Failing to take the full RMD incurs a steep tax penalty, currently set at 25% of the shortfall.

Strategy Tips for 2025

Making the most of your TSP options requires not just understanding the numbers, but applying them to your individual career stage, financial goals, and retirement horizon. These strategies can help:

Contribute early and consistently. Time in the market helps maximize compounding.
Select the correct catch-up contribution based on your age and Secure Act eligibility.
Double-check annual addition totals if you receive generous matching contributions.
Use installment withdrawals to spread income over the year and reduce large tax hits.
Design withdrawal plans that fulfill RMDs while aligning with your budget.
Track your age milestones to switch strategies when RMDs or new contribution tiers begin.

TSP Limits and Spousal Considerations

A surviving spouse who inherits a TSP account is entitled to create a beneficiary participant account. This account continues to grow tax-deferred, though no new contributions may be made. Withdrawal rules mirror those of a separated federal employee:

Minimum withdrawal: $1,000
Withdrawal changes: 30-day spacing rule applies
Installments, lump sums, and rollovers are available

This setup allows your spouse to manage inherited retirement assets without being forced into immediate taxation or liquidation.

If both you and your spouse have separate retirement accounts, you may want to synchronize your withdrawal schedules and strategies to align with shared retirement goals.

Flexibility Without a Cap Requires Responsible Planning

The flexibility to withdraw any amount annually from your TSP gives you significant control, but it also requires discipline. With no upper withdrawal limit, you have to determine how much is appropriate to withdraw each year based on tax status, longevity, market conditions, and personal needs.

Plan for long-term sustainability by spacing out your withdrawals, considering tax brackets, and accounting for RMDs. The structure of TSP allows freedom, but also demands thoughtful financial behavior.

Avoiding Pitfalls and Staying on Track

Avoid common errors by regularly reviewing your account and staying informed:

Set annual reminders to adjust contribution levels as income or age changes.
Review IRS updates every fall for the following year’s limits.
Use the online TSP portal to track contributions, initiate withdrawals, or download statements.
Consult with professionals to avoid triggering unnecessary taxes or penalties.

Expert Help Is Available At Every Stage

Whether you’re just getting started, in mid-career, or preparing to retire, TSP planning can be complex. Understanding contribution ceilings, managing installment withdrawals, and timing Roth distributions all involve nuance. Mistakes can lead to tax consequences or missed opportunities.

If you want peace of mind and a personalized strategy that works with your complete financial picture, speak with a licensed agent listed on this website. Expert advice helps you stay compliant, make confident decisions, and reach your retirement goals with clarity.