Can Too Many Contributions to Your TSP Actually Hurt You?

May 8, 2017


This question may seem like a silly one. You may even be thinking “Isn’t the point to contribute as much as possible so I can have the most money I can at retirement?”. Yes, you want to have the most money you possibly can at retirement. However, there comes a point when you can contribute TOO much to your TSP and you could miss extra money! So, are you a FERS employee contributing a significant percentage of your pay to your TSP? If you answered yes, you may want to read on.

Annual Limit

In 2017, the annual limit on elective deferrals (how much you can contribute in a calendar year) into your TSP is $18,000. If you reach this maximum contribution limit before the end of the calendar year, your contributions will get suspended.

FERS employees can receive as high as 5 percent of pay in TSP agency contributions. Of that 5 percent, 1 percent is what’s referred to as Agency Automatic Contribution and the remaining 4 percent is Agency Matching Contribution. The 1 percent Agency Automatic Contribution is automatically contributed to your TSP by the government whether you contribute or not. The Agency Matching Contribution is contingent on your contributions.

To receive the maximum Agency Match of 4 percent, you must contribute at least 5 percent of your pay per pay period. The matching schedule is as follows:

  • First 3 percent—dollar for dollar
  • Next 2 percent—50 cents on the dollar

Given this information, hitting the $18,000 maximum before year end will also cause the 4 percent Agency Match to get suspended.


Basically, if you contribute more than $693 per pay period ($693 x 26 pay periods = $18,018), you will find yourself leaving free money on the table. Make sure you know how much you can contribute to ensure you receive the full match.

First, determine how much you have contributed year to date (not including agency contributions), then subtract that from $18,000 and divide by the number of remaining pay periods. The resulting amount is the dollar figure you need to contribute per pay period through the end of the year.

Catch Up Contributions

Catch up contributions are for employees 50 years or older. They do not receive a match of any kind and they also have a $6,000 annual limit. However, there is no negative impact on accelerating catch up contributions to fully fund the $6,000 limit before year’s end.

Contributing to a TSP is one of the best ways to ensure you have money for retirement. Further, taking advantage of the full agency match is extremely smart, just be sure to know what the annual limits are and avoid going over that limit so you can maximize your TSP.

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