How Much Can You Save for Retirement in 2025? If you’re a federal or postal employee, your Thrift Savings Plan (TSP) is one of the best tools to build a solid retirement. But are you taking full advantage of TSP contribution limits? Understanding how much you can contribute and the benefits of doing so can make a big difference in your financial future. Let’s break it down simply, so you can make the most of your retirement savings.

What Are TSP Contribution Limits for 2025?

The TSP contribution limit is the maximum amount you’re allowed to contribute to your Thrift Savings Plan each year. For 2025, the IRS has set the annual limit at $23,000 for federal and postal employees under age 50.

If you’re 50 or older, you can contribute an additional $7,500 in “catch-up” contributions, bringing your total to $30,500. These limits apply to employee contributions and don’t include any matching funds provided by your agency.

Why Contributing the Maximum Matters

Contributing the maximum allowed to your TSP isn’t just about saving more—it’s about maximizing benefits like:

1. Tax Savings: Contributions to a traditional TSP are made pre-tax, reducing your taxable income for the year. This means you pay less in taxes now while growing your retirement fund.
2. Free Money from Matching Contributions: If you’re a Federal Employees Retirement System (FERS) participant, your agency will match up to 5% of your salary. Not contributing at least 5% means you’re leaving free money on the table.
3. Compound Growth: The earlier and more you contribute, the more time your savings have to grow through compound interest.

How to Make the Most of TSP Contributions

1. Start Small if You’re on a Budget

If you can’t afford to max out your TSP right away, that’s okay. Begin by contributing at least 5% of your salary to take full advantage of matching funds. Over time, increase your contributions as your budget allows.

2. Automate Your Contributions

Set up automatic payroll deductions to ensure consistency. Regular contributions, no matter how small, add up over time and keep your retirement savings on track.

3. Take Advantage of Catch-Up Contributions

For employees nearing retirement, catch-up contributions are a powerful tool. If you’re 50 or older, bump up your savings to the higher limit to give your retirement fund a boost.

Key Differences Between Roth and Traditional TSP Accounts

Federal and postal employees can choose between two types of TSP accounts: Roth TSP and Traditional TSP. Here’s how they compare:

Feature	Traditional TSP	Roth TSP
Tax Benefits	Contributions are pre-tax. Pay taxes later.	Contributions are post-tax. Withdrawals are tax-free.
Best For	Lowering taxable income now.	Avoiding taxes on retirement withdrawals.
Withdrawals	Taxed during retirement.	Tax-free if criteria are met.

Choosing between the two depends on your current income and tax expectations in retirement. Many employees split their contributions between the two for flexibility.

Don’t Miss These Important Deadlines

Federal employees need to keep an eye on contribution deadlines to make sure they maximize their TSP benefits. The deadline for making contributions to your TSP account typically aligns with the calendar year (December 31). Review your contributions regularly to ensure you’re on track before the deadline.

How TSP Contributions Fit Into Your Bigger Financial Picture

Your TSP is just one piece of the puzzle. Federal and postal employees should also consider other benefits and plans, such as:

• Federal Employee Health Benefits (FEHB): Ensuring healthcare coverage for retirement.
• FERS Pension: Your fixed monthly retirement benefit.
• Social Security: Plan how this will supplement your TSP savings.

By combining these resources, you can create a retirement plan that offers both stability and flexibility.

Common Questions About TSP Contribution Limits

Can I contribute more than the limit?

No, the IRS caps contributions at $23,000 (or $30,500 if you’re 50 or older). Contributions exceeding these limits are returned to you as taxable income.

What happens to my agency’s matching contributions?

Agency matching contributions do not count toward the IRS limits. This means you can receive matching funds even if you’ve maxed out your contributions.

How do I adjust my contribution amount?

You can update your contribution percentage through your payroll system or your TSP online account. Changes usually take effect within one or two pay periods.

Take Control of Your Retirement Savings

Maximizing your TSP contributions can have a huge impact on your future financial security. Start by reviewing your current contributions, setting realistic savings goals, and taking advantage of every benefit your TSP offers.

Ready to make the most of your benefits? Learn more about how your TSP fits into a comprehensive financial plan at Postal Disability Coverage.

Call to Action

Plan for a better future today! Schedule a free consultation with one of our retirement specialists to ensure you’re making the most of your TSP and other benefits.