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Published: Mar 01, 2024 14 min read

From Social Security, 401(k) and 403(b) plans to traditional or Roth individual retirement accounts (IRAs), there’s no shortage of retirement plans available today that can help diversify your retirement income in the future. But for U.S. government employees and members of the uniformed services specifically, the Federal Employment Retirement System (FERS) provides another option: the Thrift Savings Plan (TSP).

Read on to learn what the Thrift Savings Plan is, the options it provides and how it can help you increase your retirement savings.

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What is the Thrift Savings Plan?

The TSP is a retirement savings and investment program for civil service workers and members of the armed forces employed by the U.S. federal government. It was established in 1986 as part of the Federal Employees’ Retirement System Act (FERSA), which aimed to modernize the retirement benefits available to federal workers and military personnel.

Over the years, the TPS has grown in popularity due to its simplicity, low administrative costs and tax advantages, making it an attractive choice for millions of government employees and service members alike. Today, it offers a range of investment choices, traditional or Roth account options and lifecycle funds tailored to various retirement dates.

Defined contribution plan

In many ways, the TSP operates similarly to a 401(k). It is an employer-sponsored defined contribution plan that allows federal workers to make tax-deferred contributions to a retirement plan. Like a 401(k), it has annual contribution limits, requires you to name beneficiaries, enables you to take withdrawals and loans against it and can provide retirement income via distributions at the age of retirement.

As a defined contribution plan, the account holder is the active participant in their retirement savings. Whereas a defined benefit plan (e.g., a pension) guarantees certain benefits based on a fixed formula, a defined contribution plan doesn’t promise a specific amount of benefits upon retirement. Therefore, it is up to the plan participant to form their investment plan through recurring contributions, an employee match if available and other determining factors.

Annual contribution limits

Like most retirement plans that aren’t annuities, the TSP is subject to IRS annual contribution limits. The current TSP contribution amount is capped at $23,000, a $500 increase over 2023’s contribution limit. If you are age 50 or older, you can take advantage of catch-up contributions, which are limited to an additional $7,500 per year, meaning the total contribution for that age group is capped at $30,500 for 2024.

If you’re able to exceed this amount but want to supplement your retirement savings, you can still invest in an IRA or take advantage of a high-yield savings account.

Who is eligible?

If you are an employee of the U.S. government, you are an eligible participant if you meet the following criteria:

  • You are an FERS employee (generally if you were hired on or after Jan. 1, 1984).
  • You are a Civil Service Retirement System (CSRS) employee (generally if you were hired before Jan. 1, 1984).
  • You are a member of the uniformed services (active duty or Ready Reserve).
  • You are a civilian employee in another category of federal government service.

Additionally, you must meet the following qualifications:

  • You are actively employed by the federal government as a civilian employee or member of the uniformed services.
  • You are in a pay status allowing you to contribute.
  • You are a full-time or part-time employee.

Plan options

Like an IRA, the TSP provides both traditional and Roth options. While both plans allow you to take distributions after age 59.5 and offer tax benefits, there are differences you should understand before deciding on one or the other. The following section provides details of each.

Traditional Thrift Savings Plan

The main difference between a traditional and Roth TSP is how they are taxed. A traditional TSP — like a traditional IRA — uses pre-tax dollars for contributions, thereby lowering participants’ taxable income in a given year. Because those contributions are tax-free, they will be taxed once you begin taking distributions.

Additionally, like a traditional IRA, a traditional TSP is subject to required minimum distributions (RMDs), meaning that you must begin taking distributions at age 72 or, if you turn 72 after Dec. 31, 2022, at age 73. To calculate what those RMDs will be, you can use’s Required Minimum Distribution Calculator.

Roth Thrift Savings Plan

A Roth TSP, like a Roth IRA, is funded with after-tax dollars. Since taxes are paid upfront, withdrawals after age 59.5 are tax-free. If you believe taxes will be higher in the future, it could be advantageous to use a Roth TSP to pay taxes now rather than in retirement. Because a Roth TSP uses after-tax dollars for contributions, it is not subject to RMDs.

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Pros and cons the Thrift Savings Plan

As with any retirement savings plan, the TSP has both benefits and drawbacks. The following section discusses both.

  • Low expense ratios
  • Diverse fund options
  • Matching contributions
  • No matching funds for Roth TSP
  • Cannot contribute after government service ends
  • Automatic enrollment for FERS employees

Pros of the Thrift Savings Plan

Low expense ratios

All retirement plans charge expense ratios, or fees that cover the costs of management, administration and marketing. As your retirement savings account grows over time, these expenses can substantially add up and impact the growth potential of your savings. Therefore, it’s important to choose a plan that has low to moderately priced fees.

TSPs offer some of the lowest expense ratios available. These range from 0.057% to 0.09% depending on the funds in which you invest. For context, the average all-in expense ratio for a 401(k) is 2.22% and can range anywhere from 0.02% to 5%.

Diverse fund options

A TSP allows you to choose from a variety of funds, with the option of making allocations to all five passive index funds, as well as one of 10 lifecycle/target-date funds. The individual investment funds include an S&P 500 index fund, a small-cap Wilshire 4500 index fund, U.S. corporate bond fund, short-term Treasurys fund and an international fund. Additionally, there is an option to invest in one of 10 lifecycle (e.g., target-date) funds as well as mutual funds.

Matching contributions

If you are a FERS or Blended Retirement System (BRS) participant, you will automatically receive 1% of your basic pay to your TSP account each pay cycle. These are called Agency/Service Automatic Contributions, and you don’t need to make any contributions to receive them.

If you’re a FERS or eligible BRS participant, you are eligible to receive matching contributions on up to 5% of the pay you contribute each cycle. The first 3% is a one-to-one match, while the remaining 2% is matched at 50 cents per $1 contributed.

Cons of the Thrift Savings Plan

No matching funds for Roth TSP

If you choose to enroll in a Roth TSP, you are ineligible for the government match. Only traditional TSPs can receive matching contributions. You are able to open both a traditional and Roth TSP, but contributions to both accounts will be added together to determine how much of the government's total match you are entitled to.

Cannot contribute after government service ends

After your employment with the federal government ends, you are no longer able to make contributions to your TSP account. Additionally, you cannot borrow against the account. Numerous withdrawal options are available, so if you transition to the private sector, for example, you are able to roll over the funds to a qualified retirement account.

Automatic enrollment for FERS employees

If you’re a FERS employee hired on or after Oct. 1, 2020, you will automatically be enrolled in the TSP and 5% of your base salary will be deducted for each pay period. FERS employees who began their federal service between Aug. 1, 2010, and Sept. 30, 2020, were automatically enrolled at 3%.

However, TSP participation for CSRS employees is elective. If you want to enroll, your account is established by your agency after you make an employee contribution election using your agency’s electronic payroll system.

Thrift Savings Plan investment options

One of the best features of the TSP is its diverse offering of passive index funds, which allow participants to mix and match depending on their retirement goals, age and risk tolerance. In total, there are five individual TSP funds, 10 lifecycle/target-date funds and a mutual fund option. The following section details each of them.

C Fund: large U.S. companies (S&P 500)

The C Fund — or Common Stock Index Investment Fund — offers the opportunity to invest in companies in the S&P 500 index. This fund is ideal if you have a lower risk tolerance and want to gain exposure to all sectors of the stock market.

F Fund: U.S. corporate bonds

The F Fund — or Fixed Income Index Investment Fund — offers the opportunity for higher rates or return over the longer term than investing in short-term securities. The F Fund offers participants relatively lower risk compared to other fixed-income investments since it only includes investment-grade securities.

G Fund: short-term Treasurys

The G fund — or Government Securities Investment Fund — offers the opportunity to receive guaranteed principal and interest payments since it uses government securities like Treasurys as the basis of the fund. Federal-issued debt instruments like bonds are backed by the full faith and credit of the U.S. government. Since the holdings in the G Fund are lower risk, they carry lower upside potential.

I Fund: international fund

The I Fund — or International Stock Index Investment Fund — offers the opportunity to gain exposure to stocks in developed countries outside of the U.S. The fund provides a way for investors to gain exposure to non-U.S. equities to help diversify their portfolio holdings.

S Fund: small U.S. companies (Wilshire 4500 Index)

The S Fund — or Small-Cap Index Investment Fund — offers the opportunity to gain exposure to small- and mid-sized U.S. companies. While small- and mid-cap companies typically present more risk and higher volatility than their large-cap counterparts, the S Fund helps participants diversify the equities in their portfolios.

L Funds: lifecycle funds (target-date funds)

The TSP offers 10 lifecycle, or target-date, funds that aim to grow assets over a specified period and toward a specified goal. These lifecycle funds offer a diversified mix of the aforementioned five individual investment funds and were designed to allow participants to invest their entire portfolio in a single, well-diversified fund based on expected returns and risk levels.

Like most lifecycle funds, each of the L Funds — except for the L Income Fund — is adjusted periodically, shifting away from higher risk and reward to lower risk and reward as the fund nears its target date. For each TSP L Fund, except for the L Income Fund, these adjustments are made quarterly. When an L Fund reaches its target date, funds are then transferred to the L Income Fund, which generally maintains the same target allocation.

Mutual fund window

The TSP also allows qualified participants to invest in its mutual fund window. If you meet certain eligibility requirements, you can choose to invest a portion of your TSP funds in mutual funds. This option permits you to transfer money from your TSP account through a mutual fund window to invest with the plan’s mutual fund vendor.

What is the Thrift Savings Plan FAQs

What are the annual contribution limits for the Thrift Savings Plan?

The TSP enforces IRS-imposed annual contribution limits of $23,000 per year, while allowing for an additional catch-up contribution of $7,500 for participants age 50 and older.

What is the Thrift Savings Plan's maximum employer match?

FERS or BRS employees automatically receive 1% of their basic pay. Matching contributions up to 5% are available for traditional Roth TSP accounts, with the first 3% being a dollar-for-dollar match and the remaining 2% matched at 50 cents per dollar. Roth TSP accounts are ineligible for matching contributions.

Can you take a loan against your Thrift Savings Plan?

Active TSP participants are permitted to borrow money from their TSP accounts. The loans are repaid along with interest through payroll deductions if you're still in federal service, or by direct debit, check or money order if you are no longer employed by the federal government. These loans offer fixed interest rates. Be mindful that borrowing against any retirement account means that you'll be missing out on those funds contributing to compound interest until they're repaid.

Summary of Money's What Is the Thrift Savings Plan?

The Thrift Savings Plan, or TSP, is a defined contribution plan for federal government employees, including civil servants and members of the armed services. Similar to a 401(k), a TSP provides participants with a retirement account option with low administrative costs, tax advantages and numerous investment funds that fit investors’ varying risk tolerances, desired diversification and retirement timelines. The TSP offers both traditional and Roth accounts, the former of which benefits from an employer match. You can contribute to a TSP account as long as you are employed by the federal government. To learn more, visit the TSP website.

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