34 Thrift Savings Plan Questions Federal Employees Can Ask

What You Need To Know

The Thrift Savings Plan (TSP) is for federal and military employees, offering similar benefits to a 401(k) plan, including automatic and matching contributions from the government. Start contributing as early as possible, and contribute enough to receive the full match. There are various investment options with a TSP account, including the G Fund (government securities), F Fund (fixed income), C Fund (common stocks), S Fund (small-cap stocks), I Fund (international stocks), and the L Funds (Lifecycle) which adjust their risk profile based on your retirement year. Understanding how the TSP works and the benefits of each fund can help you enhance your retirement savings.

1. What is a Thrift Savings Plan or TSP?

The Thrift Savings Plan is a tax-deferred retirement plan for federal employees and members of the military. It was introduced as a retirement vehicle in 1987.

2. Who is eligible?

If you’re an employee of the federal government or military, you likely qualify for the TSP. This may be an employee of the United States Postal Service or a military branch.

You’re generally eligible for this plan if you work full or part-time and are actively employed by the federal government. You can be a civilian employee or member of the military.

In general, you also must meet the following criteria:
• FERS employee (generally hired on or after January 1, 1984)
• Civil Service Retirement System (CSRS) employee (generally hired before January 1, 1984, and didn’t convert to FERS)
• Member of the uniformed services (Ready Reserve or active duty)
• Civilian in other categories of government service

3. Thrift Savings Plan vs 401(k) – what’s the difference?

The TSP is similar to the private sector’s 401(k) plan. It’s so similar that financial planners often call it the cousin to the 401(k).

Like a 401(k), the TSP goes with you if you leave your employer. You can continue managing the money, but you can’t make any more contributions.

4. Does the government contribute money?

Yes. Workers with the Federal Employees Retirement System (FERS) and Blended Retirement System (BRS) automatically receive 1% of their salary in their Thrift Savings Plan. That’s a benefit of working for the federal government. It doesn’t come out of your paycheck. It’s essentially free money.

Even if you don’t contribute, which we don’t advise, you’ll still get that 1%. It’s called an Agency/Service Automatic Contribution.

5. When are you vested in TSP?

Vested means that you get to take all the money in your account with you, and it applies to money that was given to you as part of an automatic payment (1%) and the earnings of that money.

Most FERS employees are vested after 3 years of service, even if you don’t contribute during that time to the TSP.

FERS employees in congressional and some noncareer positions are vested after 2 years of service.

BRS members are vested after 2 years.

If you leave your position before you’re vested, you will lose the 1%.

6. Does TSP have a match?

Yes, in addition to the automatic 1% provided to federal employees, your federal agency or service will also match contributions up to 5%. That’s another way it’s similar to a 401(k).

Think of the match also as free money, because you’re given this money based on your contribution. The more you give, the more the federal government matches, up to 5%.

Look how quickly the match can double your money. If you contribute 5%, which is the most the government will match, you’ll earn a 4% match plus the 1% automatic government contribution. So, 10% of your salary will go toward the Thrift Savings plan each year, but you’ll only be responsible for 5% of that. The government will pay the other 5%.

However, if you only contribute 1% of your salary, you’ll only get a 1% match plus the 1% automatic payment for a total contribution of 3%.

A 10% investment will grow faster than a 3% investment.

7. Why is the government setting how much I contribute?

Depending on when you were hired or rejoined federal service work, your agency may automatically establish your contribution level to the TSP.

If you began or rejoined service on or after October 1, 20202, you are automatically enrolled at 5% of your salary.

The government automatically enrolls federal workers at 3% if they were began or rejoined the workforce between August 1, 2010 and September 30, 2020.

You can stop the automatic contributions by logging into your account.

8. When should I start investing in the TSP?

Ideally, you want to start investing in the TSP as early as possible. Your future self will be glad you did!

While the TSP is called a savings plan and helps you save for retirement to maximize its benefits, I think of it as a purchasing strategy.

As a wealth advisor to federal employees, I help clients think of retirement planning like any big purchase in life. You often hear that purchasing a home is your biggest investment in life. Actually, you need to save more money for retirement.

When you flip your notion of retirement planning and savings, you can create a winning strategy to get the most value and benefits out of an investment vehicle like the thrift savings plan.
You’re buying your retirement.

So, just like you save early for a down payment on a home, the sooner you save for retirement, the better off you’ll be. Yes, even in your 20’s. Retirement may be the last thing on your mind, but don’t de-prioritize this time in your life.

The idea is to get time on your side and take advantage of compound growth. Think of it like this – If you want to be sitting under a shade tree when you retire, it’s best to plant that tree as early as possible so it has time to grow. Of course, you will want to nurture the tree through the years as well. You can do that on your own or with the help of a wealth advisor.

As with many things in life, the decision presents you with tradeoffs. Do you spend all your money now and receive instant gratification or do you save it all and delay your gratification? For many, the answer is somewhere in the middle.

A big house may provide immediate gratification for your family, but can you still achieve your long-term financial goals with that investment?

What about those lavish vacations? Can you still invest enough money so you’re prepared for a stress-free retirement?

Be consistent with your strategy. You can always increase the amount you contribute to your thrift savings plan over time, especially as your pay increases with raises.

Even a small increase in the amount you contribute pays off. For example, if you make $43,000 a year and invest 5% of your paycheck (the minimum needed to get the full match), you’ll have approximately $180,000. That’s based on the investment returning 6% per year compounded over 30 years.

However, your TSA would increase to $260,000 if you invested 6% of your $43,000 yearly salary.

That’s an increase of $80,000 by changing your allocation from 5% to 6%.

Don’t let life get in the way of investing. Inevitably, distractions will come up. You may get divorced, have a child with college expenses, or experience financial hardship. If you have no choice but to lessen the amount you allocate to your retirement purchase, that’s ok. As soon as possible, though, get back to investing.

9. What is a good TSP allocation strategy?

Are you a person who lives for today or saves for tomorrow? Or somewhere in between?

As fee-only certified financial planners, we’ve seen many people take one of these approaches to this decision.

The Good Way - Guestimate
With this investment method, you guestimate how much you should contribute to the TSP Plan. You’re getting started, and that’s a step in the right direction. Something is better than no investment!
The Better Way – Take Advantage of the Match
Others take advantage of the matching funds. That’s the better way because you leave nothing on the table and take advantage of the full federal employee retirement benefits.
The Best Way – Establish financial goals.
The best way to determine how much money to invest in your thrift savings plan starts with establishing retirement goals. Project how much money you’ll need when you retire based on your lifestyle, needs, and life goals.

No matter which approach you choose, pay yourself first! While it’s important to invest as early and as much as possible, you still have to live comfortably until retirement.

10. What is the maximum contribution per year?

Like a 401(k), there are limits to how much you can contribute each year to the TSP. In 2024, the IRS set the limit at $23,000, which is $500 more than the previous year. If you’re over age 50, you can catch up on contributions. These federal employees can add an extra $7,500 a year to their TSA.

Federal and private sector employees are subject to the same maximum contribution guidelines.

11. What type of funds can I invest in the TSP?

TSP offers six individual funds that are low-cost, broadly diversified, and easy-to-understand.

G Fund: Government Securities Investment Fund
F Fund: Fixed-Income Index Investment Fund
C Fund: Common-Stock Index Investment Fund
S Fund: Small-Capitalization Stock Investment Fund
I Fund: International-Stock Index Investment Fund
L Fund: Specific Lifecycle Fund (includes a mix from the five previous funds)

Here are brief descriptions of the funds and things many investors don’t know about the funds. Those may be benefits to you or a con. It depends on your personal financial situation, which a financial advisor can help you determine so you can pick the best fund(s).

12. What is the G Fund?

The Government Securities Investment Fund or the G Fund is a popular choice among federal employees because it is completely protected from loss. So, it feels safe, especially when the market is dipping dramatically as we’ve seen recently.

The U.S. Treasury calculates the G Fund as the weighted average yield of approximately 181 U.S. Treasury securities on the last day of the previous month.

What you may not know about the G Fund – the rest of the story

1. May not keep up with inflation.
2. No other fund anywhere – is like this fund.

13. What is the F Fund?

The F Fund is well diversified with over 12,000 holdings and is made to match the performance of the Bloomberg US Aggregate Bond Index. Most US traded investment grade bonds are represented. All bonds are investment grade.

What you may not know about the F Fund – the rest of the story

1. Includes foreign bonds traded in the US.
2. Does not included municipal bonds or TIPs (Treasury Inflation-Protected Securities)

14. What is the C fund?

The C Fund tracks the S&P 500 and includes 500 top companies in leading industries of the US economy.

All constituents must be US companies.

What you may not know about the C Fund – the rest of the story.

1. Makes up about 80% of the value of the US market!
2. About 40% of sales of these top 500 US-based companies comes from overseas.

15. What is the S fund?

The S Fund tracks small and medium companies from the Dow Jones Completion Total Stock Market Index. Again, all constituents must be US companies.

What you may not know about the S Fund – the rest of the story

1. Does not overlap with companies in the C Fund.
2. Makes up about 20% of the value of the US market.

16. What is the I fund?

The I Fund tracks companies in the MSCI EAFE. It provides exposure to large and mid-sized companies in Europe, Asia, and Australia. The I fund holds stock from 21 developed countries.

What you may not know about the I Fund – the rest of the story

1. No exposure to emerging markets.
2. Currency fluctuations affect performance.

17. What are the L Funds, also known as Lifecycle Funds?

Lifecyle Funds are also known as L Funds. Some describe them as Set It and Forget It Funds. They’re considered simple and low-maintenance yet still provide diversification.

They get more conservative as you get closer to retirement.

There are 10 L funds available. Each one has a different mix of the five individual funds (G Fund, F Fund, C Fund, S Fund, and I Fund).

The idea is that you pick the L fund that matches up with your retirement date. For example, if you plan to retire in 2040, you would select the L 2040 fund. As time passes, the fund gets more conservative – this is called moving along the glide path.

Once the fund’s date matches the actual date, the fund is converted into the L Income fund.

The L funds 2025 through 2065

The 2065 fund is aggressive, with about 99% of the allocation to stocks
The 2025 fund is much more conservative, with about 40% of the allocation to stocks.
The other dated funds are somewhere in between.

What you may not know about the Lifecycle Funds – the rest of the story

First, they’re rebalanced daily. Probably way too often!
They also have way too much international exposure, in our opinion.

L Funds are not for everyone. Consider the fund one aspect of your retirement. Look at your entire retirement, especially guaranteed income like Social Security and pensions. You may be able to take more risks in your investments than a person who does not have a guaranteed pension.

18. What is the L Income Fund?

The L Income fund is a type of L Fund that is very conservative! 80% of your money is allocated to bonds, and just 20% to stocks.

You also may have too much international exposure.

What you may not know Lifecycle L Income Fund – the rest of the story

Although low risk over the long-run – may not keep pace with inflation.
If you are withdrawing, you are selling stocks and bonds to raise cash. Might not be selling when “high."

You have great fund choices – so why not build your own portfolio? Need some help? Let’s chat.

19. What is the TSP Share Price History?

Want to know the average share price today or ten years ago? This data is readily available.

For example, in July 2024, TSP fund share prices were:

G Fund: $18.4584
F Fund: $19.8031
C Fund: $85.4162
S Fund: $80.3487
I Fund: $42.7850
L funds: Ranged from around $9 to $55

Prices will fluctuate over time, depending on various factors. Investments are for the long haul. Remember that tree analogy? Plant the seeds now for growth over time.

20. What are TSP rates of return?

In addition to finding out how much you’ll pay for a share of a TSP fund, you also have to consider the rate of return. That way, you know if it’s worth paying the share price.

In 2024, most of the funds had a positive rate of return.

The federal government makes it easy to see historical rates of return, which can help you make the best decision for your financial future.

Talking with a certified financial planner who specializes in TSP funds and prioritizes federal employees can help you and your family find the right fund.

21. How do you decide between a traditional TSP and Roth?

With the TSP, you can decide when to pay taxes.

If you select the Traditional option, your contributions are pre-tax, lowering your taxable income the year you make the contributions. You pay taxes when you withdraw the money from the plan.

If you choose the Roth, your contributions are after-tax. You pay taxes as you contribute to the plan (unless your contributions come from tax-exempt pay), and your money grows tax-free. So, when you retire and withdraw your money, you don’t pay taxes, assuming you follow all the rules.

In other words, the government is saying, “You can pay us now, or you can pay us later!”

Generally, the Roth TSA makes more sense when you’re in a lower tax bracket, potentially when you’re beginning your federal career.

If you didn’t start with the TSP early in your career and you’re now in a higher tax bracket, does that mean you should opt only for Traditional contributions? As with many decisions, the answer varies. A deep dive into your taxes, along with some projections, will give you the answer.

It's important to keep in mind that matching contributions are Traditional and will be taxed when you take distributions.

Want to prepare for a possible large distribution from your TSP? Would it be better to get the money from the Roth side? Again, it depends on your tax situation.

A word of caution: Many retirees today have done a great job of building a sizable Traditional nest egg – perhaps too good of a job! Focusing solely on savings on taxes in the year of contribution may cause a tax torpedo later in life.

22. What is the Mutual Fund Window?

The Mutual Fund Window is a new entrant to the TSP with roughly 5,000 mutual funds in roughly 300 mutual fund families, including those offered by Fidelity, T. Rowe Price, and Vanguard. This option is geared toward the true do-it-yourselfer.

It offers more investment flexibility, but there are fees and eligibility requirements.

To qualify, you must have $40,000 in the TSP and allocate no more than 25% of your account value to Mutual Fund Window.

Get ready to pay! One of the greatest benefits of individual funds and Lifecycle funds are their low costs. Not so with the Mutual Fund Window. Add in high fees for annual fees of around $150 and trading fees of $28.75 for both buys and sells, and you will get a sour taste in your mouth!

23. What TSP fees can I expect to pay?

Of course, there are always administrative fees that you pay as part of retirement planning. Aside from the Mutual Fund Window, you don’t have to worry too much about these with the general funds, as they are often wrapped into the plan itself.

If you want to see the going fee rates for each of the plans, you can explore the detailed fee structure.

24. What investments should I select?

There are many things to consider when choosing TSP investments. These are the top two!What’s your risk profile?

Taking this short quiz as a starting point but by no means the best and only way to determine your risk tolerance.

We think the best way to determine your risk profile is to determine how much risk you need to take to meet your goals. The answer lies in a financial plan and retirement projection.

Consider your pension – so maybe be riskier than a person who does not have a pension.

Time Horizon

Time Horizon is the other factor you want to consider when choosing TSP investments. Generally speaking, the longer you have until retirement, the more risk you can take. Your time horizon, though, is probably longer than you think.

While we open talk about retirement as the end goal, your time horizon is your the rest of your life (or spouse's life). You don't need to have all of your investments in cash the day you retire.

Even after you retire, you'll still be fighting inflation. That will continue for the rest of your life. Stocks are a good way to do that.

25. What is a good TSP balance at retirement?

This seems like an end-of-the-article question, but it’s important to ask at the beginning as part of a comprehensive retirement strategy.

It’s a common question – how much should you have in your investment accounts when you retire? Perhaps you’ve heard a million dollars as it’s a common figure thrown around.

However, it all depends on your retirement goal. Where do you plan to live? What do you plan to spend money on? Do you plan to travel, buy an RV, or live in the same house you’ve lived in for years? Will you have health expenses?

Depending on your personal circumstances (married, divorced, or single), health and retirement plans can affect how much you’ll need.

Also, your diversification matters. Is the TSP your only investment vehicle, or do you have others? That brings us to our next question.

26. What other retirement portfolio options are available to federal employees?

The TSP is just one financial vehicle that sets federal employees up for retirement.You have to consider all your wealth, as the TSP is just one component of your retirement plan. You want to be tax-smart and utilize all the benefits available to federal employees, including:

Thrift Savings Plan
Federal Employees Retirement System (FERS) pension
Social Security
Social Security Supplement

Your federal pension and Social Security take care of themselves. Your commitment to our country and time invested in your federal or military career earn you Social Security benefits and a pension.

The more time you serve, the greater your pension.

When thinking about retirement planning, you want a diverse portfolio.

27. Who administers the TSP?

The Federal Retirement Thrift Investment Board (FRTIB) administers the plan. FRTIB is an independent government agency.

28. How do enroll in the TSP?

Depending on your government organization, you may be auto-enrolled, or you may have to follow the process and enroll yourself.

You can enroll and adjust your account by logging into your TSP account or setting up a new one if you don’t already have one.

29. Who should I name as my beneficiaries?

Seems obvious that you would want to include beneficiaries for your TSP, right? We include this decision since we are surprised how many TSP and 401(k) participants do not have beneficiaries listed.

It’s important to have not one but at least two beneficiaries.

Your primary beneficiary is the person or entity next in line that will receive the monies in your account after you pass away. Most people list their spouse.

If your primary beneficiary is not alive or disclaims their inheritance, then the Secondary beneficiary is next in line. Most people name other family members or a trust as their secondary beneficiary.

Choosing your beneficiaries is a personal choice – make sure you name at least one primary and one secondary beneficiary. It’s also important to consider changes to your beneficiaries as you experience life events.

30. What do I do once I retire?

You really have two choices - Leave it in the TSP or rollover. There can be benefits and drawbacks to both.

Leave it in the TSP: Benefits

Low-expense investment options.
Can roll other retirement accounts into the TSP.

Leave it the TSP: Drawbacks

Not many investment options.

Rollover to an IRA: Benefits

More investment options.
Consolidation of accounts.

Rollover to an IRA: Drawbacks

You may pay more in investment expenses.

31. Can I access my money in TSP before I retire?

The short answer is “Yes.”

However, ask yourself this question – Should I access my money in the TSP before retirement? The answer is probably “No.”

If you need to, you can take a loan or consider in-service withdrawls. However, loans and financial hardship distributions fall into the category of “Possibly, the best last choice to meet your financial needs.”

32. What are TSP loans?

There are two types of TSP loans.

General purpose with a repayment period of 12 to 60 months
Primary residence loan with a repayment period of 61 to 180 months.

Just remember, if you take a loan from your TSP you are removing earnings power from your retirement account until the monies are paid back.

33. What are in-service withdrawls?

There are two types of in-service withdrawals.

Financial Hardship for which you will have to exhibit a financial need.
If under age 59½ plan to pay taxes and possibly a penalty.

In our opinion, the best choice to access your monies before you retire is the Age 59 ½ in-service withdrawal.

34. Can you manage my TSP for me?

Yes. Investment management is one of our areas of expertise at Open Road Wealth Management, including federal retirement planning. Read about Bill and Mary, two Kansas City federal employees who we helped with their TSP plan and retirement MAP.

We even have a federal retiree who works as a wealth advisor. Kelli Harpe retired from the Federal Bureau of Prisons and knows about the TSP firsthand. We can consult with you so you can manage your TSP or we can manage it for you.

In the Kansas City area, we’ve worked with Kansas City Federal employees on the Missouri and Kansas side. The Federal Government is the largest employer in Kansas City, with over 38,000 employees, according to the Greater Kansas City Federal Executive Board.

There are several federal employers with locations in the Kansas City area, including Ft. Leavenworth, the Federal Reserve Bank, the Internal Revenue Service, the National Archives, the Department of Veterans Affairs with a medical center in KCMO, and other typical government agencies.

No matter where you work or live, Todd Minear is a CERTIFIED FINANCIAL PLANNER™ professional for federal employees nationwide and works with Federal Benefits Expert, Kelli Harpe. We are fee-only advisors, which means we only collect fees from clients rather than commissions from financial products. This type of retirement advice means we have your best interests at heart rather than a partnership with a product.

Like other financial planning, it’s a good idea to work with a federal retirement expert who can guide you to the right TSP funds so you can maximize your earnings before retirement.

Make the right decisions now, and you’ll be happy about the “purchase” of your retirement.

Need help? Take our self-assessment to see if we are the right fit to help you with these overwhelming decisions.

In the end, it’s important to view your TSP as a component of your retirement purchase. It’s simply one piece of all the things you need to master of all the things that can lead to the retirement you want.

34 Questions Federal Employees Should Ask About the Thrift Savings Plan