What is the Thrift Savings Plan?


The Thrift Savings Plan (TSP) is a retirement savings plan for federal employees, including employees covered under the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS), and servicemembers. When you contribute to the TSP, you get the same types of savings and tax benefits as you would if you contributed to a 401(k) offered by a private-sector employer.

How much you accumulate for retirement in your TSP account depends on how much you contribute and how much you earn on your contributions over time. When you enroll, you can decide what percentage of pay you want to contribute each pay period, and your contributions are sent directly to the TSP. However, you can only contribute up to a certain limit each year. In 2017, this contribution limit is $18,000 ($24,000 if you’re age 50 or older and eligible to make catch-up contributions). If you’re automatically enrolled in the TSP and don’t elect a different contribution amount, 3% of your basic pay will be deducted from your paycheck and deposited in your TSP account each pay period.

You can choose to make traditional contributions, Roth contributions, or both. Traditional contributions are pretax contributions; they’re taken out of your paycheck before your income is taxed, which lowers your taxable income now. Your pretax contributions and any earnings on them accumulate in your account tax deferred, but will be taxable when you withdraw them (except for contributions made from tax-exempt pay earned while in a combat zone). Roth contributions are after-tax contributions; there’s no current tax benefit because your contributions are made after your income is taxed. But because they’ve already been taxed once, your Roth contributions are always tax free when you withdraw them. Any earnings on your contributions will also be tax free when you withdraw them, assuming you meet certain requirements. You can decide how to allocate your contributions among the diverse investment options offered by the TSP, based on your investment goals and tolerance for risk.

Other TSP benefits depend on which retirement system covers you. For example, if you’re covered by FERS, you will also receive Agency Automatic Contributions equal to 1% of your basic pay each pay period (you receive these whether or not you contribute to your TSP account). You may also be eligible to receive Agency Matching Contributions on the first 5% of the pay you contribute each pay period. The first 3% of what you contribute is matched dollar-for-dollar; the next 2% of what you contribute is matched at a rate of 50 cents on the dollar. However, if you’re covered by the CSRS or are a servicemember, you’re generally not eligible to receive Agency Automatic or Matching Contributions (servicemembers in critical specialties may receive matching contributions under certain circumstances). Agency contributions and any earnings on them accumulate in your account tax deferred, but will be taxable when you withdraw them.

These are just some of the basics. For more information about the TSP, visit the TSP website at www.tsp.gov.