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Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.
Updated September 02, 2024 Fact checked by Fact checked by Ryan EichlerRyan Eichler holds a B.S.B.A with a concentration in Finance from Boston University. He has held positions in, and has deep experience with, expense auditing, personal finance, real estate, as well as fact checking & editing.
Part of the Series Retirement Planning GuideDefining Your Retirement Goals
Types of Retirement Accounts
Retirement Strategies by Age
COVID-19 and Your Retirement
A thrift savings plan (TSP) is a retirement investment program that is open only to federal employees and uniformed service members, including the Ready Reserve. It is a defined-contribution plan that offers federal employees many of the same benefits that are available to workers in the private sector.
A TSP closely resembles a 401(k) plan offered by private employers.
There are several ways to invest in a Thrift Savings Plan. These can include:
No matter the type of TSP or contribution structure you choose, the contribution limit is $23,000 for 2024 (up from $22,500 in 2023). Employees age 50 or older can also make catch-up contributions of $7,500 in either year.
Employees who are new to federal employment can roll over 401(k) and individual retirement account (IRA) assets into a TSP. Rollovers can also go in the opposite direction if federal employees move to the private sector.
A thrift savings plan (TSP) is a defined-contribution retirement plan with advantages similar to private-sector plans.
The F, S, C, and I funds in the TSP are index funds currently managed by the BlackRock Institutional Trust Company under contract by the Federal Retirement Thrift Investment Board (FRTIB). This independent government agency administers the TSP and acts as a fiduciary that is legally liable to manage the TSP prudently and in the best interests of participants and their beneficiaries.
Index funds in the TSP are designed to mimic the return characteristics of the corresponding benchmark index. For example, the C Fund is invested in a fund that replicates the S&P 500 Index, which is made up of the stocks of 500 large- to medium-sized U.S. companies. L funds are invested in the five individual TSP funds, and their asset allocations are based on the individual investor’s time horizon.
The maximum annual contribution to a Thrift Savings Plan in 2024. If you are 50 or older, you can add an extra $7,500.
The mutual fund window is for TSP participants who want more flexibility in their retirement investments. You can invest a portion of your TSP savings through the TSP mutual fund window into available mutual funds you choose.
However, there are certain requirements for participating in the mutual fund window, such as having at least $40,000 in your TSP account and not investing more than 25% of your account balance in mutual funds using the window.
Comparing the TSP to an IRA is not an either/or proposition—you can have both a TSP and an IRA at the same time. One primary difference between them is their respective contribution limits.
For 2024, the annual limit is $23,000 for a TSP (with a catch-up contribution of $7,500 for those over 50, the limit is $30,500); for an IRA, it is much less—$7,000 ($8,000 if you are over 50). (If you have multiple IRAs, this is the total amount you can contribute.) Thus, a TSP allows you to build your retirement funds faster than an IRA if you have the extra money to do so.
For 2023, the annual limit is $22,500 for a TSP (with a catch-up contribution of $7,500 for those over 50, the limit is $30,000); for an IRA, it is $6,500 ($7,500 if you are over 50).
Another big difference is in the employer match. The federal government provides a sliding percentage scale of matching contributions for your TSP. Even if you contribute nothing, it will contribute 1% of your annual salary to your TSP.
The scale tops out at a 5% government match if you contribute 5% of your salary to your TSP, thus doubling the amount of money invested. Because an IRA is something you set up for yourself, with no employer involved, there are no employer contributions. (The exception: SEP IRAs and SIMPLE IRAs.)
The investment fees also differ. TSP fees are pretty low, usually around 0.05%, and transparent. In the private sector, IRA investment fees can range from 0.5% to 2.5%, depending on the kind of fund, and it can sometimes be difficult to know exactly how much they are in aggregate.
IRAs offer more investment opportunities than TSPs, as TSPs are limited to the six funds discussed above. This allows an IRA holder to be more aggressive in their investment strategies than a TSP holder.
Some final differences have to do with withdrawals. Traditional IRAs and TSPs, as well as Roth TSPs, have required minimum distributions (RMDs) that start at age 73 (up from 72 in previous years). With an IRA, you are allowed to take whatever withdrawals you like, without a penalty, starting at age 59½.
TSPs only allow you to withdraw monthly, quarterly, or annually. You can request that the payment be a specific dollar amount or an amount based on your life expectancy and account balance that is recomputed annually.
IRAs also have an early withdrawal penalty of 10% for any money taken out when you are younger than 59½. However, if you retire at age 55 or older, TSPs will waive the 10% penalty. Even better, if you qualify under Federal Employees Retirement System (FERS) special provisions, this age drops to 50.
You can call their toll-free Thriftline at 877-968-3778, Monday through Friday, from 7 a.m. to 9 p.m. ET. There is also an international phone line at 404-233-4400 that is not a toll-free line. The 711 TTS Relay is available for people with hearing or speech disabilities by dialing 711. You can also use AVA, the TSP virtual assistant, from your TSP account page.
Thrift Service Center, C/O Broadridge Processing, P.O. Box 1600, Newark, NJ 07101-1600.
The Message Center allows you to send and receive messages if you have an online account. Response time is two business days.
A TSP is not exactly the same thing as a 401(k), though they are structured similarly and have the same contribution limits. A TSP is what the federal government offers instead of a 401(k), the type of plan offered by private employers. It is possible to have both if you have worked for both a government and a private employer.
TSPs and IRAs both have benefits. With a TSP, you can contribute considerably more each year, expect matching contributions from the federal government, and pay lower investment fees. You have greater control over your investments with an IRA, and there are no limits on withdrawals from it upon retirement. You can borrow from your TSP (up to $50,000), but you cannot borrow from an IRA account.
If you quit your job, your Thrift Savings Plan will remain as is if the balance is $200 or more, and it will continue earning. However, if you're not fully vested as a FERS or BRS employee, the government may withdraw its contributions and the associated earnings from your account. From there, you can control the principal in the account and adjust your investments, but you cannot make any more contributions.
The Thrift Savings Plan is a retirement plan for federal employees and servicemembers. It is similar to private sector plans like the 401(k). The TSP is not necessarily better or worse than other retirement plans. If you have questions about your plan, contact your TSP administrator.
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Description Part of the Series Retirement Planning GuideDefining Your Retirement Goals
Types of Retirement Accounts
Retirement Strategies by Age
COVID-19 and Your Retirement
The CSRS provided the retirement, disability, and survivor benefits for most U.S. civilian service employees working for the federal government.
The life expectancy method calculates IRA payments by dividing the balance of a retirement account by the policyholder’s anticipated length of life.
An after-tax contribution is a deposit into a retirement account of money that has been taxed in the year in which it was paid into the account.
Rule 72(t), issued by the Internal Revenue Service (IRS), allows for penalty-free withdrawals from an IRA account and other certain tax-advantaged accounts.
A 457 plan is a tax-advantaged retirement savings account available to many employees of governments and nonprofit organizations.
In cliff vesting, employees receive full benefits from their retirement plan account at a certain date, versus becoming vested gradually over time.
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