A:

The Federal Employees' Retirement Security Act of 1986 established the Thrift Savings Plan, or TSP. It is a qualified retirement plan made available to current and retired federal government and agency employees. The Thrift Savings Plan is a defined contribution plan that is quite similar to a 401(k) plan seen at companies in the private sector. As with other qualified retirement plans, employees contribute money to the account through payroll deductions, and the employer makes matching contributions up to a certain limit as defined by the plan. Contributions are tax-deferred until retirement as are earnings within the account.

The investment choices available within the Thrift Savings Plan include six funds: Life-Cycle Funds that allocate investments based on a proposed retirement date; the G-fund that invests in government securities; the F-fund, which is a fixed income index fund; the C-fund, a common stock index fund; the S-fund, a small-cap stock index fund; and the I-fund, an international stock index fund. As with other qualified retirement plans, the participant is able to choose and allocate any percentage into each desired fund.

The Thrift Savings Plan also accepts rollovers from previous retirement plans such as an old 401(k) or IRA. Likewise, if a participant terminates employment and goes to work in the private sector, the Thrift Savings Plan account can either remain intact or be rolled over into the new employer's plan or to a Traditional IRA. Though the Thrift Savings Plan is limited in its available investment options like other qualified retirement plans, it does offer a low-cost way for government workers to save efficiently for retirement.

Hot Definitions
  1. Risk Tolerance

    The degree of variability in investment returns that an individual is willing to withstand. Risk tolerance is an important ...
  2. Donchian Channels

    A moving average indicator developed by Richard Donchian. It plots the highest high and lowest low over the last period time ...
  3. Consumer Price Index - CPI

    A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, ...
  4. Moving Average - MA

    A moving average (MA) is a widely used indicator in technical analysis that helps smooth out price action by filtering out ...
  5. Stop Order

    A stop order is an order to buy or sell a security when its price increases past a particular point in order to limit losses ...
  6. Inflation

    The rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of ...
Trading Center