Thrift Savings Plan (TSP)

What Is a Thrift Savings Plan (TSP)?

A thrift savings plan (TSP) is a type of retirement investment program open only to federal employees and members of the uniformed services, including the Ready Reserve. It is a defined-contribution (DC) plan that offers federal employees many of the same benefits that are available to workers in the private sector.

A TSP closely resembles a 401(k) plan offered by private employers.

Key Takeaways

  • A thrift savings plan is similar to a 401(k) plan for federal employees and uniformed services personnel.
  • Participants in a TSP can get an immediate tax break for their savings.
  • They can also choose to invest in a Roth for freedom from taxes after retirement.
  • Plan participants can put their money into any of six investing options.
  • You can roll over a 401(k) and IRAs into a TSP if you leave the private sector to work in a public one. If you leave a public service job with a TSP, you can also roll it over to a 401(k) or IRA, as well.
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How a Thrift Savings Plan (TSP) Works

TSP benefits can include automatic payroll contributions and agency matching contributions. Participants can choose to make tax-deferred contributions into a traditional TSP, which means the money that flows into the account will not be taxed until it is withdrawn. They may also choose to invest in a Roth TSP. This option allows employees to make after-tax contributions to their plans so that they’ll owe nothing in taxes when they withdraw the money after retiring. In either case, the contribution limit to a TSP is $20,500 for 2002 (the same as for 401(k) plans).

Employees new to federal employment can roll over 401(k) and individual retirement account (IRA) assets into a TSP—and vice versa if they move to the private sector.

A thrift savings plan (TSP) is a defined-contribution retirement plan that has many of the advantages of private-sector plans.

The TSP Investment Options

The TSP offers a choice of six funds in which to invest:

  • The Government Securities Investment (G) Fund
  • The Fixed-Income Index Investment (F) Fund
  • The Common-Stock Index Investment (C) Fund
  • The Small-Capitalization Stock Index Investment (S) Fund
  • The International-Stock Index Investment (I) Fund
  • Specific life-cycle (L) funds, designed to include a mix of securities held in each of the other five individual funds

The F, S, C, and I funds in the TSP are index funds currently managed by the BlackRock Institutional Trust Company under contract by the Federal Retirement Thrift Investment Board (FRTIB). This independent government agency administers the TSP and acts as a fiduciary that is legally liable to manage the TSP prudently and in the best interests of participants and their beneficiaries.

Index funds in the TSP are designed to mimic the return characteristics of the corresponding benchmark index. For example, the C Fund is invested in a stock index fund replicating the S&P 500 Index, which is made up of the stocks of 500 large- to medium-sized U.S. companies. L funds are invested in the five individual TSP funds, and their asset allocations are based on the individual investor’s time horizon.

$20,500

The maximum annual contribution to a Thrift Savings Plan in 2022. If you are 50 or older, you can add an extra $6,500.

TSPs vs. IRAs

This is not an either/or proposition because you can have both a TSP and an IRA at the same time. One chief difference between them is their respective contribution limits. For 2022, the annual limit is $20,500 for a TSP ($27,000 for those over 50); for an IRA it is much less—$6,000 ($7,000 if you are over 50)—and that is a combined total if you have multiple IRAs. Thus, a TSP allows you to build your retirement funds at a faster pace than an IRA does.

Another big difference is in the employer match. The federal government provides a sliding percentage scale of matching contributions for your TSP. Even if you contribute nothing, it will contribute 1% of your annual salary to your TSP. The scale tops out at a 5% government match if you contribute 5% of your salary to your TSP, thus doubling the amount of money invested. Because an IRA is something you set up for yourself, with no employer involved, there are no matching contributions.

The investment fees also differ. TSP fees are quite low, usually around 0.05%, and transparent. In the private sector, IRA investment fees can range from 0.5% to 2.5%, depending on the kind of fund, and it can sometimes be difficult to know exactly how much they are in aggregate. However, IRAs offer a greater variety of investment opportunities than TSPs do, limited as they are to the six funds discussed above. This allows the IRA holder to be more aggressive in their investment strategies than the TSP holder.

Some final differences have to do with withdrawals. Traditional IRAs and TSPs, as well as Roth TSPs, have required minimum distributions (RMDs) that start at age 72. (Only Roth IRAs are not subject to RMDs.) With an IRA, you are allowed to take whatever withdrawals you like, without a penalty, starting at age 59½. TSPs only allow you to withdraw monthly, quarterly, or annually, and you can request that the payment be a specific dollar amount or an amount based on your life expectancy and account balance that is recomputed annually.

IRAs have an early withdrawal penalty of 10% for any money taken out when you are younger than 59½. However, if you retire at age 55 or older, TSPs will waive the 10% penalty. Even better, if you qualify under Federal Employees Retirement System (FERS) special provisions, this age drops to 50.

How Do I Contact TSP Administrators?

You can call their toll-free Thriftline at 877-968-3778, Monday through Friday, from 7 a.m. to 9 p.m. ET. There is also an international phone line at 404-233-4400 that is not a toll-free line. The TDD (Telecommunications Device for the Deaf) line for the hearing impaired is 877-847-4385.

The general mailing address is Thrift Savings Plan, P.O. Box 385021, Birmingham, AL 35238. If you have an online account, there is a Message Center that allows you to send and receive messages. Response time is two business days.

Finally, for specific inquiry categories (loans, death benefits, court orders, federal tax levies, press requests, and more) there are individual post office boxes and/or email addresses listed on the TSP website.

Is a TSP the Same Thing As a 401(k)?

Not exactly, though they are structured similarly and have the same contribution limits. A TSP is what the federal government offers instead of a 401(k), which is the type of plan offered by private employers. It is possible to have both if you have worked for both a government and a private employer. However, the total contribution to these retirement plans cannot exceed the annual contribution limits set by the Internal Revenue Code.

Is a TSP Better Than an IRA?

TSPs and IRAs both have benefits. With a TSP, you can contribute considerably more money each year, expect matching contributions from the federal government, and pay lower investment fees.

You have greater control over your investments with an IRA, and there are no limits on withdrawals from it upon retirement. You can borrow from your TSP (up to $50,000), but you cannot typically borrow from an IRA account.

Unlike with an IRA, you can request a complete withdrawal of your TSP account in monthly payments, an annuity lifetime payment, or a lump sum amount if you leave your job in federal service. In addition, you can combine these options.

What Happens to My Thrift Savings Plan If I Quit My Job?

If you quit your job, your Thrift Savings Plan will remain as is if the balance is $200 or more, and it will continue earning. You can control the account and make adjustments to your investments but you cannot make any more contributions.

Correction—June 16, 2022. This article has been edited to highlight that it is possible to have both a 401(k) and a TSP in some circumstances.

Article Sources
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  2. Thrift Savings Plan. "Move Money Into the TSP."

  3. U.S. Office of Personnel Management. "TSP Transfers and Rollovers: How, When, and Why (or Why Not!)."

  4. Thrift Savings Plan. "Individual Funds."

  5. U.S. Department of Labor. "Performance Audit of Thrift Savings Plan Investment Management Operations," Pages 6 - 7 of PDF.

  6. U.S. Department of Labor. "U.S. Department of Labor. "Performance Audit of Thrift Savings Plan Investment Management Operations," Page 9 of PDF.

  7. Thrift Savings Plan. "L Income."

  8. Internal Revenue Service. "Retirement Topics - IRA Contribution Limits."

  9. Thrift Savings Plan. "2022 TSP Contribution Limits."

  10. Thrift Savings Plan. "Contribution Types."

  11. Thrift Savings Plan. "Administrative and Investment Expenses."

  12. Thrift Savings Plan. "Important Tax Information About Your TSP Withdrawal and Required Minimum Distributions," Page 1.

  13. Internal Revenue Service. "Retirement Topics — Required Minimum Distributions (RMDs)."

  14. Internal Revenue Service. "IRA FAQs - Distributions (Withdrawals)."

  15. Thrift Savings Plan. "Before You Withdraw."

  16. Thrift Savings Plan. "Withdrawal Options."

  17. Thrift Savings Plan. "Considering Your Next Move?," Page 2 of PDF.

  18. Thrift Savings Plan. "Important Tax Information About Payments From Your TSP Account," Page 5.

  19. Thrift Savings Plan. "We're Here to Help."

  20. Thrift Savings Plan. "Loan types and terms."

  21. Thrift Savings Plan. "Withdrawing Your TSP Account After Leaving Federal Service."

  22. Thrift Savings Plan. "Frequently Asked Questions." 

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