What is the Thrift Savings Plan (TSP)
The Thrift Savings Plan (TSP) is the retirement investment plan for federal employees and the DoD Uniformed Services. TSP closely resembles typical 401(k) plans that most civilian employers offer. TSP has nearly 6.2 million enrollees and around $732 Billion in assets under management making it one of the largest retirement funds in the United States.
Unfortunately, new TSP enrollees receive little to no education when they start an account. The TSP board of Directors has made many quality of life improvements since I first enrolled 16 years ago. Back then I was given a piece of paper and told to sign up. That was it. For example, new enrollees are now automatically place in life cycle funds (which we’ll cover) vice the G fund. Recently, they’ve revamped the website and even added mutual funds. In this article we’ll cover the basic, the different funds, and a few investing strategies.
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Thrift Savings Plan Login
One of the first things you want to do is ensure you can access your TSP login information, without it you won’t be able to take any action on your account.
TSP Contribution Limits 2024
TSP allows automatic payroll deductions up $23,000 annually (TSP Max contribution for 2024). Investors over the age of 50 can add an additional $7,500 in catch-up contributions annually in 2024. They also allow Tax Deferred (Traditional), Roth, or a combination of those two for your contributions.
Traditional VS Roth TSP
The basics of Traditional versus Roth are:
Traditional TSP Option
Contributions are made pre-tax. You pay no tax now but will pay tax on withdrawal on both your contributions and the compound interest they generate when you retire. For example, if you withdrew $1,000 and pay 10% tax, only $900 goes to you. Lastly, one benefit to traditional contributions is that they lower your taxable income.
TSP Roth Option
Contributions are made post-tax. You pay the taxes now so your withdrawals are tax free at retirement. You don’t pay tax on the compound interest. For example, if you withdrew $1,000 you would get the full $1,000. We dive deeper in our Guide to the TSP Roth Option if you’re interested in reading more about the Pros and Cons.
The right choice is based on your personal finance goals and there isn’t a one size fits all option. I recommend you run the numbers using TSP retirement calculator or one of the other Thrift savings plan calculators.
On the next page we’ll take a look at a breakdown of the different Thrift Savings Plan Funds.