Thrift Savings Plan (TSP)

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Thrift Savings Plan (TSP): What It Is and How It Works

The Thrift Savings Plan (TSP) is the defined-contribution retirement plan for federal employees and uniformed service members. It functions similarly to a private-sector 401(k), offering tax-advantaged contribution options, employer matching for many federal employees, low-cost index funds, and rollover flexibility.

Key takeaways

  • TSP is a defined-contribution plan for federal workers and service members, comparable to a 401(k).
  • Contributions can be traditional (tax-deferred) or Roth (after-tax for tax-free qualified withdrawals).
  • The TSP offers six core investment funds plus lifecycle (L) funds and a mutual fund window.
  • Contribution limits are higher than IRAs and government service may provide employer matching.
  • You can roll 401(k) and IRA assets into a TSP when moving into federal service, and roll TSP assets into a 401(k) or IRA when leaving.

How the TSP works

  • Contributions: Employees contribute via payroll deductions. Contributions reduce taxable income if made to a traditional TSP; Roth contributions are made after tax but qualified withdrawals are tax-free.
  • Employer contributions: The federal government provides automatic and matching contributions for eligible employees (a sliding scale up to a 5% match for many plans).
  • Contribution limits: $23,000 for 2024 and $23,500 for 2025. Catch‑up contributions for participants aged 50+ are $7,500 (both years). Beginning in 2025, an enhanced catch‑up is available for ages 60–63 ($11,250).
  • Rollovers: Incoming rollovers from 401(k)s and IRAs are permitted; TSP balances can also be rolled into IRAs or 401(k)s when leaving federal service.
  • Withdrawals and distributions: Required minimum distributions (RMDs) begin at age 73. TSP withdrawal options include periodic payments (monthly, quarterly, annually) or scheduled amounts; rules and penalties differ from IRAs. The 10% early‑withdrawal penalty is waived for retirees age 55+ in many TSP situations (and age 50 under some FERS provisions).
  • Loans: Loans are allowed from a TSP account (subject to plan rules and limits, commonly up to $50,000).

TSP investment options

Core funds:
* G Fund — Government Securities Investment Fund (short-term government securities; principal and interest backed by U.S. government securities).
F Fund — Fixed‑Income Index Investment Fund (broad bond/index exposure).
 C Fund — Common‑Stock Index Investment Fund (tracks the S&P 500).
S Fund — Small‑Capitalization Stock Index Investment Fund (U.S. small- and mid-cap stocks).
 I Fund — International‑Stock Index Investment Fund (non-U.S. equities).
* L Funds — Lifecycle (target‑date) funds that blend the five core funds and automatically adjust allocations based on time horizon.

Additional option:
* TSP Mutual Fund Window — Allows investing a portion of your TSP balance in approved external mutual funds. Requirements and limits apply (generally a minimum TSP balance and a cap on the share of assets you may allocate to the window).

Index funds (F, S, C, I) are managed under contract and designed to track benchmark indices. L Funds provide a hands‑off, age-based allocation.

TSP vs. IRA — main differences

  • Contribution limits: TSP limits are much higher than IRA limits ($23k+ vs. $7k for IRAs in the same years).
  • Employer match: TSP often includes federal matching contributions; IRAs generally do not (except SEP/SIMPLE IRAs).
  • Fees: TSP investment fees are very low and transparent (often around 0.05%); IRA fees vary widely depending on investments and providers.
  • Investment choices: IRAs offer broader investment options; TSP is limited to its core funds (plus the mutual fund window).
  • Withdrawals and RMDs: Both have RMDs (age 73). IRAs allow flexible withdrawal amounts in retirement; TSP distribution options and timing can be more structured. TSP may waive early‑withdrawal penalties for certain retirement ages tied to separation from service.

If you leave federal service

  • Accounts with a balance of $200 or more remain in the TSP and continue to earn returns.
  • If you are not fully vested (under certain plans), employer contributions and associated earnings may be forfeited.
  • You can leave the balance in the TSP, roll it into an IRA or a private 401(k), or take permitted withdrawals depending on eligibility and account balance. You cannot make further contributions once separated.

Contact and help

  • Thriftline (toll-free): 877-968-3778 (Mon–Fri, 7 a.m.–9 p.m. ET)
  • International: 404-233-4400 (not toll-free)
  • TSP virtual assistant (AVA) and Message Center are available through the online TSP account portal.
  • Mailing address: Thrift Service Center, C/O Broadridge Processing, P.O. Box 1600, Newark, NJ 07101-1600.

Bottom line

The TSP is a low-cost, high‑limit retirement plan tailored to federal employees and service members. It offers tax-advantaged contribution options, government matching for many participants, and a concise set of index-based investment choices. Whether the TSP is the right vehicle depends on individual goals, other retirement accounts (like IRAs), and whether you value broader investment choice or very low fees. Contact your TSP administrator for plan-specific rules and personalized guidance.