What Is a Thrift Savings Plan?
Let me explain what a Thrift Savings Plan, or TSP, really is. It's a retirement investment program available only to federal employees and uniformed service members, including those in the Ready Reserve. This is a defined-contribution plan that gives you many of the same benefits private-sector workers get through their plans.
You can think of a TSP as closely resembling a 401(k) plan that private employers offer. It provides tax advantages and various ways to invest your money for retirement.
Key Takeaways
Here's what you need to know right away: A Thrift Savings Plan is a defined-contribution plan for federal employees and uniformed services personnel, much like a 401(k). When you participate, you get an immediate tax break on your contributions, and you can opt for a Roth TSP to avoid taxes in retirement. You have six investing options to choose from, and if you're moving between private and public sectors, you can roll over funds from a 401(k) or IRA into your TSP—or the other way around.
How a Thrift Savings Plan Works
A TSP gives you an upfront tax deduction on contributions and lets your investments grow tax-deferred. You can invest through automatic payroll contributions, agency matching, tax-deferred traditional TSP where withdrawals are taxed in retirement, or after-tax Roth TSP where qualified withdrawals are tax-free.
No matter which type you pick, the contribution limit is $23,000 for 2024 and $23,500 for 2025. If you're 50 or older, add catch-up contributions of $7,500 both years. Starting in 2025, workers aged 60 to 63 get a higher catch-up limit of $11,250.
If you're new to federal work, you can roll over your 401(k) or IRA into a TSP. And if you leave for the private sector, you can roll your TSP into a 401(k) or IRA.
TSP Investment Options
You get a choice of six funds plus a mutual fund option in the TSP. These include the Government Securities Investment (G) Fund, Fixed-Income Index Investment (F) Fund, Common-Stock Index Investment (C) Fund, Small-Capitalization Stock Index Investment (S) Fund, International-Stock Index Investment (I) Fund, and specific Lifecycle (L) funds, along with the Mutual Fund Window.
The F, S, C, and I funds are index funds managed by BlackRock under contract with the Federal Retirement Thrift Investment Board, an independent agency that oversees the TSP as a fiduciary in your best interest. These index funds aim to match benchmark indexes, like the C Fund replicating the S&P 500.
L funds allocate across the five individual funds based on your time horizon. The mutual fund window lets you invest part of your TSP in other mutual funds, but you need at least $40,000 in your account and can't put more than 25% into it.
TSP vs. IRA
You don't have to choose between a TSP and an IRA—you can have both. The big difference starts with contribution limits. For 2024, TSP allows $23,000 plus $7,500 catch-up if over 50, totaling $30,500; for 2025, it's $23,500 plus $7,500, totaling $31,000. IRAs limit you to $7,000 or $8,000 with catch-up, across all your IRAs.
That means a TSP lets you save more faster, but combining both maximizes your options. On employer matching, the government gives you up to 5% match if you contribute 5%, and even 1% if you contribute nothing—IRAs don't have that unless it's a SEP or SIMPLE IRA.
Fees are low in TSP at about 0.05%, while IRAs can range from 0.5% to 2.5%. IRAs offer more investment choices beyond TSP's six funds, potentially for higher returns. For withdrawals, both have RMDs at 73, but IRAs let you withdraw freely after 59½ without penalty, while TSP limits to monthly, quarterly, or annual payments. TSP waives the 10% early penalty if you retire at 55 or older, or 50 under FERS special provisions.
Contact TSP Administrators
If you need to reach out, call the toll-free Thriftline at 877-968-3778, Monday through Friday from 7 a.m. to 9 p.m. ET. There's an international line at 404-233-4400, not toll-free. For hearing or speech disabilities, dial 711 for TTS Relay. You can also use the TSP virtual assistant AVA from your account page, or send messages through the Message Center for a two-business-day response.
Is a TSP the Same Thing As a 401(k)?
A TSP isn't exactly a 401(k), but they're structured similarly with the same contribution limits. The government offers TSP instead of a 401(k), which private employers provide. You could have both if you've worked in both sectors.
Is a TSP Better Than an IRA?
TSPs and IRAs each have pros: TSP allows higher contributions, government matching, and low fees; IRAs give more investment control and no withdrawal limits in retirement. You can borrow up to $50,000 from TSP, but not from an IRA.
What Happens to My Thrift Savings Plan If I Quit My Job?
If you quit and your balance is $200 or more, your TSP stays put and keeps earning returns. If not fully vested under FERS or BRS, the government might pull its contributions. You can manage the investments but can't add more contributions.
The Bottom Line
The Thrift Savings Plan is your retirement option as a federal employee or service member, similar to a 401(k) but not better or worse than other plans. If you have questions, contact your TSP administrator directly.
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