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Thrift savings plan (TSP)

The TSP is a Federal Government-sponsored retirement savings and investment plan .  Congress established the TSP in the Federal Employees' Retirement System Act of 1986.  On October 30, 2000, the Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001 (Public Law 106-398) was signed into law and extended participation in the TSP, which was originally only for Federal civilian employees, to members of the uniformed services. 

The purpose of the TSP is to provide retirement income. The TSP offers Federal employees the same type of savings and tax benefits that many private corporations offer their employees under "401(k)" plans.  

The TSP is a defined contribution plan.  The retirement income that you receive from your TSP account will depend on how much you have contributed to your account during your working years and the earnings on those contributions.

How much can I contribute?
Beginning in 2006, there are no longer any percentage limits on employee or military contributions to the TSP. TSP contributions will be limited only by the restrictions imposed by the Internal Revenue Code which is $15,500 per year (for 2007 and 2008) or 100% of your income, whichever is lower. Also, if you are at least age 50 (or will become age 50 during the calendar year) and if you have made or will make the maximum amount of employee contributions for the calendar year (e.g., $15,500 in 2008), you may also make catch-up contributions to your TSP account of an additional $5,000. Military members serving in tax-free combat zones are allowed up to $46,000 (for 2008; was $45,000 in 2007) in annual contributions.

What are the major features of the TSP?
For all participants, the TSP offers the following:

  • Immediate employee contributions
  • Before-tax savings and tax-deferred investment earnings
  • Daily valuation of accounts
  • Low administrative and investment expenses
  • Transfers or rollovers of eligible distributions into the TSP
  • A choice of investment funds:
    • 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)
    • Lifecycle (L Funds)
  • Ability to start, change, stop or resume TSP contributions at any time (except those in the 6-month non-contribution period following a financial hardship in-service withdrawal)
  • Ability to make contribution allocations daily
  • Ability to make interfund transfers daily
  • General purpose and residential loans from your own contributions and attributable earnings while you are in Federal service
  • Catch-up contributions for participants age 50 or older
  • In-service withdrawals for financial hardship or after you reach age 59½
  • Portable benefits and a choice of withdrawal options after you separate from Federal service
  • Ability to designate beneficiaries for your account balance
  • Protection of spouses' rights for loans and withdrawals and recognition of qualifying court orders

Other features for FERS participants
Once you are eligible, you also will receive agency contributions which can more than double your investment amount (on the first 5% that you contribute):

  • Agency automatic (1%) contributions (vested over 3 years)
  • Agency matching contributions (immediately vested) based on the amount you contribute

Other potential features for military participants
Under the law that extended the TSP to the uniformed services, each service may designate critical specialties for matching contributions.  Members serving in those specialties who agree to serve on active duty for 6 years may be eligible for matching contributions during the 6-year active duty obligation. 

The matching contributions apply only to amounts contributed from basic pay and not from any incentive pay or special pay.  If you do not contribute basic pay to the TSP, you will not be eligible to receive matching contributions.  Matching contributions apply to the first 5 percent of pay that you contribute each pay period. Your contributions are matched dollar-for-dollar on the first 3 percent of pay you contribute each pay period and 50 cents on the dollar for the next 2 percent of pay.

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