The Thrift Savings Plan (TSP) is a retirement savings and investment plan for federal employees and members of the uniformed services, including the Ready Reserve.
Established by Congress in the Federal Employees’ Retirement System Act of 1986 it offers the same types of savings and tax benefits as 401(k) plans offered by private employers.
One of the main advantages of the TSP is that it is a low-cost option for retirement savings. Expenses for the TSP’s investment options are among the lowest of any employer-sponsored retirement plan.
Participants in the TSP can choose to contribute a portion of their salary to the plan on a pre-tax or after-tax (Roth) basis. Pre-tax contributions reduce the participant’s taxable income for the year, which can lower their tax bill. After-tax Roth contributions are not tax-deductible, but qualified withdrawals from the account, including earnings, are tax-free.
There are five investment options available in the TSP: the Government Securities Investment Fund (G Fund), the Fixed Income Index Investment Fund (F Fund), the Common Stock Index Investment Fund (C Fund), the Small Capitalization Stock Index Investment Fund (S Fund), and the International Stock Index Investment Fund (I Fund).
Participants can allocate their contributions among these funds or choose a Lifecycle (L Fund) that is based on their target retirement year and automatically adjusts its asset allocation to become more conservative as the target year approaches.
The TSP also offers a variety of tools and resources to help participants plan for their retirement, including an online calculator to estimate future account balances and the amount of income that the account could provide in retirement.
In summary, the Thrift Savings Plan is a valuable retirement savings option for federal employees and members of the uniformed services, offering low costs and a range of investment options. It is an important tool for building financial security in retirement.
So don’t miss out on the opportunity to make some money while you’re serving. And remember it’s never too late to start contributing.