Thrift Savings Plan

For those working for the federal government or the armed services, a Thrift Savings Plan is a significant form of compensation. In addition to offering a tax-advantaged method of retirement savings, the government will also match employees' retirement savings contributions. Similar to other retirement programs, getting a head start is crucial.

What is the Thrift Savings Plan ?

The Thrift Savings Plan is a retirement savings and investment plan for members of the military and federal employees. TSP includes the same tax benefits as 401(k) plan, and many agencies offer matching contributions.

As part of the Federal Employees’ Retirement System Act, the TSP (Thrift Savings Plan) was introduced in 1986. The TSP was established to allow federal employees the chance to put money aside for retirement in a tax-advantaged account, much like a 401(k) plan.

For government employees, the TSP is a retirement savings and investment plan. Through savings and tax-deferred benefits that many private firms provide their employees, the TSP's goal is to provide retirement income. You can have TSP contributions taken straight out of your paycheck, and you can invest that money in a variety of different funds. A match of up to 5% is also available for contributions.

Key Facts of Thrift Savings Plan

  • The government provides federal employees with a specific kind of retirement savings plan called a Thrift Savings Plan (TSP).
  • For government employees, a TSP is a tax-advantaged retirement savings plan.
  • For government employees and members of the uniformed forces, a thrift savings plan is comparable to a 401(k) plan.
  • There may be a 10% early withdrawal penalty if you take money from your TSP early due to financial difficulty.
  • In 2023, federal workers are eligible to make a TSP contribution of up to $22,500. In 2023, they are eligible to contribute an extra $7,500 if they are 50 or older.
  • The five core funds or a target-date fund that combines percentages of the five core funds are the two options available to savers.

How Does a Thrift Savings Plan Work ? 

The Federal Retirement Thrift Investment Board, a separate agency, is responsible for managing the Thrift Savings Plan. The Thrift Savings Plan, also known as the TSP, was founded by the Federal Employees' Retirement Security Act of 1986. A 401(k), a type of defined contribution plan provided by private sector businesses, is comparable to the Thrift Savings Plan.

Only federal employees who desire to save money for retirement can use the TSP. These plans' main goal is to supplement any annuity benefits you could get through the CSRS or the FERS system with retirement income.

There is no waiting time when you start working for the government; you can start making payments to a TSP immediately. Even if you aren't contributing anything from your paychecks to the plan, you can start getting the automatic 1% match. The first 3% of your pay that you donate as a FERS employee is matched dollar for dollar. The following 2% receives a 50 cent match.

A traditional or Roth TSP designation is available. Traditional TSPs are taxed in the same way as conventional IRAs (IRA). Contributions are made with pre-tax money, therefore taxes must be paid when the funds are withdrawn.

With a Roth TSP, contributions are made on an after-tax basis, meaning taxes are paid now rather than at withdrawal time. Up to the yearly contribution restrictions, you can choose to make both regular and Roth contributions.

A Thrift Savings Plan can be invested in a number of different ways. These may consist of :
  • Agency matching contributions
  • Automatic payroll contributions
  • After-tax investments in a Roth Thrift Savings Plan (withdrawals are untaxed in retirement)
  • Tax-deferred contributions into a traditional Thrift Savings Plan (withdrawals are taxed in retirement)

Most employees become eligible for a full match of up to 5% of their income after two years. That is free money.

Who is Eligible for the Thrift Savings Plan ?

You must work for the federal government or be a member of the military to be eligible to make contributions to a Thrift Savings Plan account. You are eligible for TSP, if you’re any of the following :
  • A FERS employee (generally if you were hired on or after January 1, 1984).
  • A CSRS employee (generally if you were hired before January 1, 1984 and did not convert to FERS).
  • A member of the uniformed services (active duty or Ready Reserve).
  • A civilian in some other categories of government service.

You must be qualified for a retirement system in addition to being :
  • Actively employed by the federal government as a member of the uniformed services or as a civilian employee.
  • In a pay status in order to contribute.
  • Working full or part-time.

Establishing Thrift Savings Plan Account

1) FERS employees :
Your agency has automatically enrolled you in the TSP if you are a FERS employee employed on or after October 1, 2020. Each pay period, 5% of your basic salary is withheld and put in the traditional balance of your TSP account. Between August 1, 2010, until September 30, 2020, everybody who started working for the government was automatically registered at 3%.

2) CSRS employees :
When you make a contribution election as a CSRS employee through your agency's electronic payroll system (such as Direct Access, EBIS, LiteBlue, Employee Express, myPay, and NFC EPP) or by filling out and submitting Form TSP-1, Election Form, your account is created by your agency.

3) Blended Retirement System (BRS) members of the uniformed services :
After 60 days of service, you are automatically enrolled in the TSP. From that point on, your provider will withdraw 5% of your basic pay from each paycheck and deposit the money in the conventional balance of your TSP account.

4) Non-BRS members of the uniformed services :
If you are a member of the uniformed services who is not covered by the Blended Retirement System (BRS), your service will establish your TSP account after you choose to make contributions using the electronic payroll system offered by your service (typically myPay for the Army, Air Force, Navy, and Marine Corps, or Direct Access for the Coast Guard and NOAA Corps), or after you fill out and submit Form TSP-U-1, Election Form.

5) Reentering members of the uniformed services :
Whether you joined the uniformed services as a new member or as an opt-in, if you were a member of the Blended Retirement System (BRS) when you left the military, you will be automatically re-enrolled when you reenter. Your service may provide you the option to opt in when you reenter the BRS if you had less than 12 years of service when you left but were not a member of the BRS. In any scenario, your enrollment will start with the first pay period following reentering, presuming you had served 60 days prior to departing. If neither of these situations applies to you, you can still open a TSP account and continue making contributions as a non-BRS member. Start, change, or stop contributions has instructions that you should follow.

6) Rehired CSRS and FERS employees :
Your agency has automatically registered you in the TSP if you were rehired as a FERS or CSRS employee on or after October 1, 2020. Each pay cycle, 5% of your basic salary is taken out of your paycheck and deposited in the traditional balance of your TSP account. Between August 1, 2010, and September 30, 2020, you were automatically enrolled at 3% if you returned to government service.

What is the Contribution Limits for Thrift Savings Plan ?

For 2023, the maximum TSP contribution limit for TSP account is $22,500. You may make a catch-up contribution of an additional $7,500 a year, if you are 50 years of age or older.

You may ask for a refund of those contributions if you find that you have made more TSP deferrals than the IRS permits for whatever reason. To request a refund for excessive deferrals, utilize Form TSP-44. Your request must be submitted to the TSP administration by March 15 of the year following the year you made the excess contributions.

Thrift Savings Plan Early Withdrawal Penalties

The Thrift Savings Plan (TSP) follows similar tax rules as traditional or Roth IRAs. This means that if you take funds from the plan before to the age of 59 1/2, you might have to pay a 10% early withdrawal penalty. Tax obligations related to withdrawals of earnings may also fall on your shoulders.

Therefore, you are permitted to withdraw money from your TSP while you are working. Financial hardship withdrawals and age-based in-service withdrawals are the two forms of early withdrawals that are permitted.

1) TSP Hardship Withdrawal :

If you truly need the money, you may withdraw it from your TSP, but you must meet at least one of the following requirements :
  • Recurring negative monthly cash flow
  • Unpaid personal casualty losses and medical expenses that aren't covered by insurance.
  • Unpaid legal expenses stemming from divorce or separation.

Next, adhere to these rules :
  • A withdrawal of $1,000 or more is required.
  • Only your personal payments and any earnings from such contributions are subject to withdrawal.

If you have both a civilian TSP account and a uniformed services account, you can only withdraw money due to extreme financial hardship from the account linked to your current job.

2) TSP In-Service Withdrawal :

If you are 59 1/2 years old or older and still employed by the federal government, you are eligible for age-based in-service withdrawals. Similar to hardship withdrawals, there are rules you must adhere to :
  • Only funds that you have earned vested rights to based on your service years may be withdrawn.
  • Your age-based withdrawal must be for at least $1,000 or the entire amount of your vested account balance.
  • Only four age-based withdrawals are permitted per calendar year.

You must take a withdrawal from your uniformed services account if you have both a civilian TSP account and a uniformed services TSP.

Types of Thrift Savings Plan Investments

Although there are few investment options accessible under the Thrift Savings Plan, it does provide a low-cost method for government employees to effectively save for retirement. The member has the same flexibility to deploy any portion of their assets to any selected funds as they do with other qualified retirement plans.

The money you save in a TSP can be invested, just like with a 401(k). Federal employees have a selection of individual and lifetime funds in which to invest their money.

Life-cycle funds (L funds) are similar to target-date funds in that, the asset allocation changes automatically over time, based on target retirement age. You can choose from ten lifecycle funds, including an income fund and funds that have target retirement dates between 2025 to 2065.

What are the Different Types of TSP Funds ?

Additionally, there are five options for individual funds, each with a different investment goal. Below are the available TSP funds :

1) G Fund : 
Invests in government securities that have been specifically issued for the TSP.

2) F Fund : 
Corporate, government, and asset-backed bonds are included in the F Fund.

3) C Fund : 
Includes large and mid cap stocks.

4) S Fund : 
Includes a mixture of small and mid cap stocks.

5) I Fund : 
Invests in more than 20 international (foreign) stocks, mostly from developed countries.

Depending on your investment time horizon and risk tolerance, you can choose which funds to invest in. Think about the fund's performance, asset allocation, and expense ratio before choosing it.

a Thrift Savings Plan's maximum allowed yearly contribution in 2023. You may add an extra $7,500 if you are 50 years of age or older.

TSP Calculator

Get customized estimations of the amount of income you might have in retirement by using these TSP calculators.

How to Set Up a Thrift Savings Plan ?

You need to set up a login to My Account in order to manage your TSP savings online. You'll generate a username, password, and ThriftLine PIN during setup in order to access your account. To establish your account security, update your contact information, and authenticate your identity, you'll follow step-by-step instructions.

To safeguard your account from fraud and ensure that you receive TSP correspondence, setting up My Account security features and maintaining accurate contact information are vital.

You may monitor and manage your investments with ease using the handy navigation provided by My Account access. You can also save time by submitting transaction requests online along with your electronic signature. By installing the official TSP Mobile App on your own smartphone, you can also access My Account.

Check troubleshooting tips if you experience any difficulties entering into My Account or setting up access to your TSP account.

1) Set up account access

Both online through My Account and over the phone with the ThriftLine, you can manage your TSP account.

2) Access TSP account online in My Account

Most TSP participants should be able to set up their My Account in 5 to 10 minutes. In order to confirm your identification throughout the setup process, you must receive a one-time passcode via text message or voice call to your phone. The process can take longer if some individuals need to take further measures to confirm their identification.

3) Change My Account login information

By going into the online account management portal, you can modify your My Account login details at any time, including your username, password, and multi factor authentication options. The online account administration site is accessed using your My Account username and password, although it is a different system from My Account. By going to My Account and simply logging in, you cannot modify your login information.

4) Find My Account username :

You can request for your username online if you've forgotten it for signing into My Account.

5) Reset My Account password :

You can request for a password reset online if you can't remember your My Account login information.

6) Access TSP account by phone on the ThriftLine :

When you enable online access to My Account, you'll be prompted to generate a ThriftLine PIN. When you call the ThriftLine, you can manage your TSP account by phone after entering your ThriftLine PIN.

7) Change ThriftLine PIN :

By calling the ThriftLine, you can modify your ThriftLine PIN at any time.

How to Open a TSP Account ?

Complete the TSP Election Form ( TSP-U-1 ) in order to start contributing to the thrift savings plan. You can download the form from this page. Enter the percentage of base pay, incentive pay, special pay, or bonus pay that will be contributed on this form.

Contact TSP Administrators

You can call toll-free Thriftline at 877-968-3778. Additionally, there is a non-toll-free international phone number at 404-233-4400. The TDD (Telecommunications Device for the Deaf) line is 877-847-4385 for those who are hard of hearing.

Frequently Asked Questions

Does TSP is better than IRA?
Both TSPs and IRAs have advantages. You can make significantly greater annual contributions to a TSP, anticipate federal matching payments, and pay reduced investing expenses. An IRA gives you more control over your savings and offers unlimited withdrawals after retirement. You can borrow up to $50,000 from your TSP, but normally you cannot borrow from an IRA account. If you quit your position in federal service, you can request a full withdrawal of your TSP account in monthly payments, a lifelong annuity payment, or a lump sum amount, unlike with an IRA. Additionally, you can mix and match these choices.

Is a Thrift Savings Plan the Same Thing As a 401(k)?
Not exactly, they are formed similarly and have the same donation restrictions, but not exactly. Instead of a 401(k), which is the type of plan provided by private businesses, the federal government offers a TSP. If you've held positions with the government and the private sector, you can have both. The overall amount contributed to these retirement plans, however, is limited by the Internal Revenue Code's yearly contribution caps.

What is the Difference Between 401(k) plan and Thrift Savings Plan?
A qualifying retirement plan for federal employees and members of the uniformed services is the Thrift Savings Plan. A qualified retirement plan for the private sector is a 401(k) plan. Although both plans are similarly designed and have the same contribution caps, there are notable variances.

If I leave my job, what happens to my Thrift Savings Plan?
Your Thrift Savings Plan will continue to grow even if you leave your work if the balance is $200 or more. You can manage the account and change your investments, but you are not allowed to make any more contributions.

How much should I invest in TSP?
You must give 5% of your base pay each pay period in order to obtain the maximum Agency or Service Matching Contributions. The IRS establishes the maximum amount that you can put into tax-deferred savings plans like the TSP each year. To optimize your contributions and make sure you don't miss out on Agency or Service Matching Contributions if you're eligible, participants should use this calculator to calculate the precise dollar amount to be withheld from each pay period.

What are the benefit of TSP?
For government employees, the TSP is a retirement savings and investment plan. Through savings and tax-deferred benefits that many private firms provide their employees, the TSP's goal is to provide retirement income. The TSP is comparable to 401(k) programs in the private sector.

How long does it take to get money from your TSP?
To learn the status of your withdrawal request, log into My Account or dial the ThriftLine. When the money has been dispersed, you'll be informed. From the time the TSP receives your request until you receive the check, you should anticipate a delay of up to 10 days.

Are you enrolled in the Thrift Savings Plan automatically?
You won't be registered in the TSP automatically, but you can amend or cancel your TSP election at any time, and if you weren't already contributing, you can decide to start doing so. You always have the option to change, reduce, or stop making contributions to your TSP account.

What's the Maximum Amount I Can Contribute to a Thrift Savings Plan?
The maximum contribution is $20,500 for 2022 and $22,500 for 2023, regardless of the TSP type or contribution structure you select (this is the same as for 401(k) plans). Additionally, employees over the age of 50 may make catch-up payments of $7,500 in 2023 and $6,500 in 2022, respectively. You are permitted to make a total contribution of $58,000 ($61,000 in 2022) between elective deferrals, catch-up contributions, and matching contributions.

Do You Get a Match on Your Thrift Savings Plan Contributions?
If you participate in the Federal Employees Retirement System (FERS) or Blended Retirement System, your agency or service will match your contributions, which is another benefit of the Thrift Savings Plan.
Even if you don't make any contributions, your agency or service will automatically deposit 1% of your pay into your TSP account if you are a member of FERS or BRS. This 1% contribution is time-vested, so you must serve for two to three years (depending on the agency) before you are eligible to keep the money.
You are also qualified for a match of up to an additional 4% on top of the additional 1% contribution. On your first 3% of contributions, you will be matched dollar for dollar, and on your next 2%, you will earn 50 cents on the dollar. Therefore, you can receive the whole 4% match if you contribute 5% of your earnings.

Can I contribute to Thrift Savings Plan after I retire?
No, after retirement you cannot make TSP contributions. Retirement income is not eligible because the Thrift Savings Plan is solely for service personnel and can only accept contributions from government payments. Your TSP account can still increase despite this, though.

What is Lifecycle Funds?
A sixth option is to put money into the Lifecycle Fund, which is made up of a portion of each of the other five funds. The funds in the portfolio are re-balanced toward less risky assets as the Lifecycle Fund nears maturity.

What options are there for TSP investments?
Six different funds are available through the TSP for investment :
  • The G-Fund for Government Securities Investment
  • Investment in Fixed-Income Index (F) Fund
  • Investing in Common Stock Indexes (C) Fund
  • Investing in Small-Capitalization Stock Index (S) Fund
  • Investment in International Stock Index (I) Fund
  • A mix of securities held in each of the other five separate funds is included in specific Lifecycle (L) funds.