What Is The Thrift Savings Plan (TSP) And How Does It Work?

Federal employees don’t have access to the same kind of workplace retirement accounts as those in the private sector. If you recently joined the U.S. government workforce as a civilian or you’re a member of the military, that means your retirement investing goes through a different account called the Thrift Savings Plan (TSP).

The TSP is a government-sponsored retirement plan offered to federal employees, similar to a 401(k) that is generally offered through private companies. Think of it like a 401(k) for your federal government job. 

How does a TSP work?

You are eligible to participate in a TSP if you are:

  •  A federal employee covered by the Federal Employees Retirement System (FERS).
  •  A federal employee covered by the Civil Service Retirement System (CSRS).
  •  A member of the uniformed services.
  •  A civilian in certain other categories of federal service such as some congressional positions, as well as some justices and judges.

Federal employees are automatically enrolled in the TSP with a 5 percent salary contribution. As part of the TSP, you are eligible to receive matching contributions from your agency or service, similar to how employers match 401(k) contributions. The 5 percent automatic contribution can be changed or reduced, but keep in mind that only those who elect to contribute at least 5 percent are eligible for a matching contribution.

New employees should be on the lookout for their TSP account number, online password and ThriftLine PIN, all of which arrive in the mail. ThriftLine is the automated response system for the TSP. From there, your online profile can be created, and you can begin making investment selections.

How much can you contribute to the TSP?

The IRS has set the TSP elective deferral limit for 2022 at $20,500.  The catch-up contribution limit, which is the maximum amount of additional money an employee can contribute over the $20,500 maximum, is $6,500 for participants turning age 50 or older in 2022.

Traditional TSP vs. Roth TSP

Similar to a 401(k) and IRA,…

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