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Retirement Planning
Thrift Savings Plan (TSP) for Federal Employees
The Thrift Savings Plan is a low-cost, tax-advantaged retirement plan for federal employees and military members, offering fund options similar to a private-sector 401(k).
Thrift Savings Plan (TSP) for Federal Employees
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What Is the Thrift Savings Plan?
- A defined contribution retirement plan for federal civilian and military employees
- Established by Congress in 1986 as part of the Federal Employees Retirement System
- Functions similarly to a private-sector 401(k) with pre-tax and Roth options
- Administered by the Federal Retirement Thrift Investment Board
- One of the largest defined contribution plans in the world
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Full Guide
What Is the Thrift Savings Plan?
- A defined contribution retirement plan for federal civilian and military employees
- Established by Congress in 1986 as part of the Federal Employees Retirement System
- Functions similarly to a private-sector 401(k) with pre-tax and Roth options
- Administered by the Federal Retirement Thrift Investment Board
- One of the largest defined contribution plans in the world
TSP Fund Options
- G Fund: government securities, low risk, stable returns
- F Fund: bond index tracking the Bloomberg U.S. Aggregate Bond Index
- C Fund: large-cap stock index tracking the S&P 500
- S Fund: small and mid-cap stock index for broader U.S. equity exposure
- I Fund: international stock index for developed-market foreign equities
Lifecycle (L) Funds
- Target-date funds that automatically adjust allocation as you approach retirement
- Each L Fund holds a mix of the five individual TSP funds (G, F, C, S, I)
- Younger participants start with heavier stock allocations for growth
- The mix shifts toward bonds and the G Fund as the target date nears
- A simple, hands-off option for participants who prefer not to manage allocations
Contribution Limits and FERS Matching
- Annual contribution limits match the IRS 402(g) elective deferral cap
- FERS employees receive an automatic 1% agency contribution even without contributing
- The agency matches dollar-for-dollar on the first 3% of pay you contribute
- An additional 50 cents on the dollar is matched on the next 2% of pay
- Contributing at least 5% of pay captures the full 5% employer match
Traditional vs. Roth TSP
- Traditional TSP contributions reduce taxable income now; withdrawals are taxed later
- Roth TSP contributions are made after tax; qualified withdrawals are tax-free
- You can split contributions between traditional and Roth in any proportion
- Agency matching contributions always go into the traditional TSP balance
- Choosing between them depends on your current vs. expected future tax bracket
Loans and Withdrawal Rules
- General purpose loans allow borrowing from your balance with repayment up to 5 years
- Residential loans for a primary home purchase allow repayment up to 15 years
- In-service withdrawals are available at age 59 and a half or for financial hardship
- After separation from service, you can take partial or full withdrawals
- Required minimum distributions begin at age 73 under current IRS rules
Why TSP Stands Out
- Expense ratios are among the lowest of any retirement plan in the country
- The 5% FERS match is an immediate 100% return on the first 3% contributed
- Portability: you can roll TSP funds into an IRA or new employer plan after leaving
- Combining TSP with FERS pension and Social Security creates a strong retirement base
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