By Harry Prabandham · Updated September 27, 2026
Retirement Planning
Thrift Savings Plan (TSP): How It Works for Federal Employees
The TSP is the federal government's 401(k)-style plan, with a $24,500 limit in 2026, low-cost index funds, and up to a 5% agency contribution.
Thrift Savings Plan (TSP): How It Works for Federal Employees
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What is the Thrift Savings Plan?
- The TSP is a defined contribution plan for federal civilian employees and uniformed service members, similar to a private-sector 401(k).
- It was created by the Federal Employees' Retirement System Act of 1986 and is run by the Federal Retirement Thrift Investment Board.
- For 2026, employees can contribute $24,500, plus an $8,000 catch-up at 50, or $11,250 at ages 60 through 63.
- FERS employees and service members under the Blended Retirement System can receive up to 5% of pay in agency or service contributions.
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Full Guide
What is the Thrift Savings Plan?
- The TSP is a defined contribution plan for federal civilian employees and uniformed service members, similar to a private-sector 401(k).
- It was created by the Federal Employees' Retirement System Act of 1986 and is run by the Federal Retirement Thrift Investment Board.
- For 2026, employees can contribute $24,500, plus an $8,000 catch-up at 50, or $11,250 at ages 60 through 63.
- FERS employees and service members under the Blended Retirement System can receive up to 5% of pay in agency or service contributions.
What funds does the TSP offer?
- G Fund: special-issue U.S. Treasury securities whose principal does not fall with interest rates, though returns may trail inflation.
- F Fund tracks the Bloomberg U.S. Aggregate Bond Index; C Fund tracks the S&P 500.
- S Fund tracks U.S. small and mid-cap stocks outside the S&P 500; I Fund tracks developed and emerging markets outside the U.S., excluding China and Hong Kong.
- L Funds are target-date mixes of the five funds that shift toward the G and F Funds as the target date nears.
- A mutual fund window offers additional funds, with extra fees and account minimums.
How does FERS agency matching work?
- Agencies contribute an automatic 1% of pay, even if you contribute nothing.
- They then match dollar for dollar on the first 3% of pay you contribute, and 50 cents per dollar on the next 2%.
- Contributing at least 5% of pay draws the full 5% in agency money.
- Agency contributions go into the traditional TSP balance, and the automatic 1% generally vests after three years of service for most employees.
Traditional or Roth TSP: what changed for 2026?
- Traditional contributions reduce taxable income now; Roth contributions are after-tax, with qualified withdrawals tax-free.
- Since January 2026, participants can convert traditional TSP balances to Roth inside the plan; conversions are taxable and irrevocable.
- Starting in 2026, employees with prior-year FICA wages above $150,000 must make catch-up contributions as Roth.
- Roth TSP balances are no longer subject to lifetime required minimum distributions.
TSP loan and withdrawal rules
- General-purpose loans can be repaid over 1 to 5 years, and residential loans for a primary home over 1 to 15 years.
- In-service withdrawals are available at 59½ or for financial hardship; after separation, you can take partial or full withdrawals or installments.
- Separating in or after the year you turn 55, or 50 for many public safety employees, avoids the 10% early-withdrawal tax.
- Required minimum distributions from traditional balances begin at 73, or 75 for those born in 1960 or later.
Keeping vs. rolling over a TSP
- Expense ratios are very low, and the G Fund has no equivalent outside the TSP.
- Rolling to an IRA can widen investment choices and withdrawal flexibility, but may raise costs.
- The TSP accepts roll-ins from IRAs and other employer plans, which can consolidate accounts.
- Coordinating the TSP with a FERS pension and Social Security shapes how much income the portfolio needs to provide.
Key takeaways
- For 2026, the TSP allows $24,500 in contributions, $8,000 or $11,250 in catch-ups, and up to 5% in agency money for FERS employees.
- Contributing at least 5% of pay draws the full FERS agency contribution.
- In-plan Roth conversions and Roth-only catch-ups for higher earners are new for 2026.
- Confirm tax effects of conversions and withdrawals with a CPA; Rubric does not prepare tax returns.
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