Can You Deposit Into an IRA & TSP?

by Cindy Quarters

The federal government’s retirement savings program is called the thrift savings plan (TSP). All members of the military as well as federal employees are eligible to have a TSP account. An individual retirement account (IRA) is another type of retirement account available to anyone who meets certain requirements. Both programs are intended to help insure that older Americans will have enough money to live on when they retire.

TSP Basics

The TSP allows participants to contribute a set amount from each paycheck. For those in the military, contributions to the TSP can also be made from tax-exempt earnings obtained while in certain hazardous areas. Additionally, military members can specify that all or part of supplemental pay received, such as hazardous duty pay, be placed in the TSP account. Money in a TSP is added before taxes, reducing the account holder’s tax liability for the year in which the contribution is made.

IRA Basics

An IRA has certain rules regarding who may contribute and how much may be placed into an IRA in any one year. As of the time of publication a single person is allowed to contribute a maximum of $5,000 to his IRA, provided she makes less than $107,000 annually. A married couple filing together can make up to $169,000 and still have an IRA. A person 50 or older can add another $1,000 in funds each year, to help her increase her holdings as she gets closer to retirement.

Contributions

You are allowed to deposit money into both an IRA and a TSP account, as long as you meet the eligibility requirements. You can open a Roth IRA or a traditional IRA, whichever you feel will work best for you. In most cases you can make small, regular deposits into your IRA or just a few larger deposits during the year, unless the IRA you chose has restrictions. If you wish, you can have more than one IRA, but your total contributions cannot exceed the annual IRA limits for all of your IRAs combined.

Taxes

Your TSP account will normally not have any taxes due until you begin to take the money out when you reach retirement age. The same is true of most kinds of IRAs, but a Roth IRA handles taxes differently. If you choose to contribute to a Roth IRA, you must pay taxes on the money before you put it in the account. The advantage of doing this is that you don’t need to pay taxes on either your contributions or the earnings of your Roth IRA when you take money out of the account in retirement.

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