The Thrift Savings Plan (TSP) is a retirement option for federal employees and military members. It is described by the government’s TSP official site as offering “the same types of savings and tax benefits that many private corporations offer their employees under 401(k) plans”. It is administered by a government agency known as The Federal Retirement Thrift Investment Board, which is supported by private sector companies that provide call center support and other services.
TSP relies on member and employer contributions-the amount of money you have access to via TSP in your retirement years depends on how much you and your employer pay into the program. TSP is often discussed as a part of a larger financial plan for retirement-it can be quite helpful to think about TSP in this way. From the TSP official site:
“If you are covered by the Federal Employees’ Retirement System (FERS), the TSP is one part of a three-part retirement package that also includes your FERS basic annuity and Social Security. If you are covered by the Civil Service Retirement System (CSRS) or are a member of the uniformed services, the TSP is a supplement to your CSRS annuity or military retired pay.”
Who Is Eligible For TSP?
“Most employees” of the federal government are eligible to participate. This includes (but may not be limited to) the following categories in general:
- A Federal Employees’ Retirement System employee hired on or after January 1, 1984.
- A Civil Service Retirement System employee hired before January 1, 1984 who did not convert to FERS.
- A member of the uniformed services including members of the Ready Reserve.
- A civilian “in certain other categories of Government service” according to TSP.gov.
Additionally, you must be actively employed full or part-time in government service to be eligible to contribute.
Signing up for TSP involves filling out Form TSP-1 (available from the TSP official site) and Election Form TSP-U-1. Applying online is also possible via your agency or military branch’s electronic forms via EBIS, LiteBlue, myPay, or Employee Express.
TSP Sign Up
When signing up for the Thrift Savings Plan, you will need to learn about the investment plan options for your funds, complete contribution allocation paperwork and set up an “interfund transfer”, and name a beneficiary for your funds should you die or become incapacitated. You can learn about how these procedures work at the TSP official website.
Thrift Savings Plans Benefits
- Low Fees – Expenses on the accounts are very low about 1/10th the average of a private mutual fund. For instance, the TSP C fund which tracks the S & P 500 consistently has one of the very lowest expense ratios as compared to other funds. This means more more money goes to the servicemembers bottom line.
- Automatic Payroll Deductions
- Pre-Tax Contributions – TSP contributions are made before taxes are calculated.
- Loan Programs – General purpose and first time home buyer loans are allowed. Repayment terms are typically 1 to 5 years.
- Matching Contributions – Each branch of service may contribute matching contributions based on certain stipulations.
- After Service Withdrawal – While servicemembers can no longer contribute they can leave their money in the TSP and continue to earn returns on it