TSP: How the Thrift Savings Plan Works for Federal Employees

The TSP is the federal government's version of a 401(k) retirement plan. Federal civilian employees and uniformed service members use it to save for retirement through automatic payroll deductions, employer matching, and tax-advantaged growth.

The plan is managed by the Federal Retirement Thrift Investment Board. It covers more than 6.5 million participants and holds over $800 billion in assets.

If you are a FERS (Federal Employees Retirement System) employee, your agency matches your contributions dollar-for-dollar on the first 3 percent of your salary, then 50 cents per dollar on the next 2 percent. You receive up to 5 percent in total agency contributions. CSRS (Civil Service Retirement System) employees do not receive matching.

Military members under the Blended Retirement System also receive automatic 1 percent contributions and matching up to 4 percent of basic pay after completing two years of service.

These limits apply to the sum of your traditional and Roth TSP contributions. Agency matching and service automatic contributions do not count toward the $23,500 cap but do count toward the overall annual addition limit of $69,000 in 2026.

Combat-zone pay is exempt from the elective-deferral limit, so deployed service members can contribute significantly more tax-free.

The TSP offers five individual index funds and a series of target-date Lifecycle Funds.

The G Fund is unique: it pays a government-guaranteed rate that floats monthly, never loses principal, and is unavailable outside the TSP. It earns more than a typical money-market fund but less than long-term bonds over time.

You choose traditional (pre-tax) or Roth (after-tax) contributions, or split between both.

Traditional TSP contributions lower your taxable income today. You pay income tax on withdrawals in retirement.

Agency and service matching contributions always go into the traditional side, even if you elect Roth. You will owe tax on those dollars when you withdraw them.

Follow these steps to get the most from your account:

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You must begin required minimum distributions (RMDs) by April 1 of the year after you turn 73 (as of 2026). The TSP calculates your RMD using IRS life-expectancy tables.

You have several withdrawal options: single lump sum, monthly payments (fixed dollar or based on life expectancy), installment payments, or a mix. You can also roll your TSP into an IRA or another employer plan without triggering taxes.

You can borrow from your vested TSP balance (your contributions plus any vested matching). You may take a general-purpose loan up to $50,000 (repaid over one to five years) or a residential loan to buy or build a primary home (repaid over one to 15 years).

Interest rates equal the G Fund rate at the time of the loan. You pay yourself back through payroll deduction.

Not contributing enough to get the full match. Five percent is the minimum to capture all agency contributions. Anything less is declined compensation.

Confusing the TSP with a pension. The TSP is a defined-contribution plan. Your retirement income depends entirely on how much you save and how your investments perform.

Ignoring Roth if you are early-career. Junior employees often face lower tax rates now than they will in retirement. Roth contributions let you pay tax at today's lower rate and withdraw everything tax-free later.

Leaving money in the TSP G Fund forever. The G Fund is safe but earns bond-like returns. Over 30 years, inflation erodes purchasing power if you never invest in stocks.

The G Fund has no equivalent outside government. It guarantees principal and pays a floating rate that exceeds inflation in most environments, with zero credit or interest-rate risk.

Investment choices are narrower. You get five index funds and target-date options, no individual stocks, no sector funds, no actively managed funds.

If you leave federal service, your TSP account stays open as long as your balance exceeds $200. You can keep contributing only if you return to federal employment or move to another eligible employer.

You can roll your TSP into a new employer's 401(k) or into a traditional or Roth IRA. Rolling Roth TSP into a Roth IRA is tax-free.

If you are rehired by the federal government, your old TSP account reactivates automatically and you resume contributions and matching.

The official TSP website (tsp.gov) offers calculators for contribution planning, loan payments, and retirement income. You can also access your account, change allocations, request withdrawals, and download forms.

If you want help building a comprehensive retirement plan, [/find-a-pro](/find-a-pro) connects you with fee-only financial planners who specialize in federal benefits.

What does TSP stand for?

TSP stands for Thrift Savings Plan. It is the retirement savings plan for federal civilian employees and members of the uniformed services, similar to a 401(k) in the private sector.

How much should I contribute to my TSP?

Can I have both traditional and Roth TSP?

Yes. You can split your contributions between traditional (pre-tax) and Roth (after-tax) in any proportion.

When can I withdraw from my TSP without penalty?

You can take penalty-free withdrawals at age 59½ or after separating from service in the year you turn 55 or later. Withdrawals before those ages trigger a 10 percent early-withdrawal penalty plus income tax on traditional balances (Roth contributions always come out tax-free, but earnings face penalty if withdrawn early).

What is the TSP G Fund and is it safe?