Thrift Savings Plan (TSP)

OVERVIEW

What Is the TSP?

The Thrift Savings Plan (TSP) is a retirement savings plan for federal employees and uniformed service members. It functions similarly to a private-sector 401(k), offering tax-advantaged investment growth.

Why TSP Strategy Matters

Because the pension alone may not replace full income, TSP plays a critical role in long-term retirement planning.

TSP Contribution Types

Traditional TSP: Pre-tax contributions

Roth TSP: After-tax contributions

TSP Investment Funds

TSP offers a limited but diversified selection of funds, including:

G Fund (government securities)
F Fund (fixed income)
C Fund (large U.S. stocks)
S Fund (smal/mid U.S. stocks)
I Fund (international stocks)
Lifecycle (L) Funds

TSP Contribution Limits

Annual TSP Contribution Limits

TSP contribution limits are set by the IRS and may change annually.
- Employee Contribution Limit: Same as 401(k) limits
- Catch-Up Contributions: Available for participants age 50+
- Agency Matching Contributions: Up to a defined percentage for eligible employees

Employer Matching Under FERS

Automatic 1% agency contribution
Additional matching on employee contributions (up to limits)

Why Contribution Planning Is Important

Maximizing contributions—when appropriate—can significantly impact retirement readiness, especially for employees who start later in their careers.

TSP Withdrawal Rules

When Can You Withdraw From TSP?

TSP withdrawal rules depend on age, employment status, and withdrawal type.

Common Withdrawal Scenarios

Separation from service
Retirement
Required Minimum Distributions (RMDs
Hardship or partial withdrawals

Tax Considerations

Withdrawals from Traditional TSP are typically taxable.
Roth TSP withdrawals may be tax-free if qualified
Early withdrawals may be subject to penalties

Why Withdrawal Planning Matters

Poorly timed withdrawals can increase taxes and reduce long-term income sustainability.

How TSP and 401(k) Plans Compare

Feature	TSP	401(k)
Fees	Typically very low	Varies by employer
Investment Options	Limited, index-based	Often broader
Employer Match	Standarized (FERS)	Employer-specific
Access	Federal employees	Private sector

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