Rightsizing TSP & IRA contributions

[elysianfields]

A few factors are coming together to make me question our current contributions to TSP & Roth IRA.

We're currently maxing our contribution to Roth TSP and Roth IRA, including catch-up contributions.  We're favoring Roth because we'll probably have massive RMDs from our Traditional TSPs and IRAs.  We have sufficient balances in Traditional IRAs to support Roth conversions, but also expect Federal pensions in retirement.

However, our income is approaching the limit for contributing the full amount to the Roth IRA ($230,000 for MFJ in 2024).  Furthermore, one provision of SECURE Act 2.0 states that if my individual 2024 wages* exceed $145,000, my 2025 TSP catch-up contributions must go to Roth.  We would prefer increasing our Roth TSPs generally due to the impending RMDs, but not as much as having the flexibility to contribute the full amount to Roth IRAs.

Consequently, it seems to me that the best course of action would have us:

- Switch our new Roth TSP contributions back to Traditional, thereby reducing our MFJ income below the $230,000 limit; this would also keep my individual wages* below $145,000 for 2024;
- Rely on Roth IRA conversions, probably taken at the end of each tax year when we have a more precise calculation of our income, to reduce our total Traditional balances and the future taxes on RMDs.

Have I missed anything?

* I read 26 USC 3121 as defining "wages" as those taxable for OASDI/FICA.

[terran]

Are backdoor Roth contributions an option for you (no previously deducted traditional IRA contributions)?

[elysianfields]

Are backdoor Roth contributions an option for you (no previously deducted traditional IRA contributions)?

Not really, our substantial Traditional balances would place us in too high a tax bracket if converted at once.

[elysianfields]

I did miss something.

Increasing Traditional TSP contributions doesn't do anything to reduce OASDI income, just AGI (duh).  Contributing to Traditional instead of Roth won't keep me under the $145,000 limit, so in 2025 and subsequent years I'll have to put my catch-up contributions into Roth; I'll continue to direct my regular contributions into Traditional, which will keep our AGI under the Roth IRA contribution limit.