The Thrift Savings Plan (TSP) is a retirement savings and investment plan offered to federal employees, including those under the Federal Employees Retirement System (FERS).
Created to mirror private-sector 401(k) plans, TSP provides federal workers a way to supplement their retirement income, offering several advantages for building long-term financial security.
The TSP is a defined contribution plan, meaning the final benefit depends on contributions and investment performance. Federal employees can contribute a portion of their salary, up to the IRS annual limit, and benefit from employer matching contributions.
For FERS employees, the government automatically contributes 1% of their salary to their TSP, regardless of employee participation. Additionally, the government matches up to 4% more when the employee contributes at least 5% of their salary, giving FERS employees 5% in matching contributions.
The TSP is an essential component of retirement planning for federal employees. With government contributions, low fees, and tax advantages, employees can build substantial savings over time. The flexibility to choose between traditional and Roth contributions offers further customization based on personal financial goals, making the TSP a powerful tool for long-term wealth accumulation.
Key features include:
- Low Fees: One of the most significant advantages of the TSP is its extremely low administrative fees, often much lower than those of many private investment plans.
- Investment Options: TSP offers a range of investment options, including lifecycle (L) funds, which adjust based on the participant’s retirement horizon, and individual funds that track government bonds, stock indices, and international markets.
- Tax Benefits: TSP contributions are made pretax, reducing taxable income for the year. TSP also offers a Roth option, allowing employees to contribute after-tax income and enjoy tax-free withdrawals in retirement.
Want to learn more? Tonex offers FERS Retirement Benefits – FERS (Federal Employees Retirement System) Series, a 1-day course where participants learn the structure and components of the FERS retirement system as well as learn how to calculate pension benefits under the Basic Benefit Plan.
Attendees also explore the integration of Social Security and Thrift Savings Plan (TSP) with FERS, and gain knowledge of the survivor benefits available under FERS.
Tonex also offers several other courses in the FERS series:
General Financial Planning for Federal Employees
FERS Retirement Refresher
Federal Benefits Overview
Introduction to FERS (Federal Employees Retirement System)
FERS Retirement Refresher
For more information, questions, comments, contact us.