A Thrift Savings Account is a retirement savings plan for federal employees, military members, and some former spouses

A Thrift Savings Account (TSA), also called a TSP, is a retirement investment account run by the federal government. It is available to people who work for the federal government, members of the uniformed services (active duty, Reserve, and National Guard), and certain former spouses of military members. You contribute money from your paycheck, the government may add matching contributions, and your money grows through investment options you choose.

The TSP is not the same as a regular savings account at a bank. It is a long-term retirement account with tax advantages — money you put in reduces your taxable income for the year, and you do not pay taxes on the growth until you withdraw the money in retirement. The account stays with you even if you change jobs within the federal system, and you can carry it forward if you leave federal service.

Key Takeaways

  • A TSP is available only to federal employees, military members, and certain former military spouses, not to the general public.
  • You choose how much to contribute from each paycheck, up to annual limits set by the IRS, and the federal government may match part of your contribution.
  • Your money is invested in one or more of five core funds or target-date funds that you select, and you can change your investment choices at any time.
  • You cannot withdraw money before age 59½ without penalty unless you separate from federal service or meet other specific conditions.
  • The TSP charges very low fees compared to most private retirement accounts, which means more of your money stays invested and grows.

Who can open and contribute to a TSP

You are may be able to access to open a TSP if you are a current federal civilian employee, a member of the uniformed services (including the Army, Navy, Air Force, Marine Corps, Coast Guard, and Space Force), or a member of the Reserve or National Guard. If you are a former spouse of a military member, you may be able to open a TSP under specific circumstances — usually if the divorce decree allows it and you meet timing requirements.

If you are a federal employee, your agency will set up a TSP account for you automatically once you are on the payroll. You do not have to do anything to open it. Military members can open an account through the TSP website or through their branch's personnel office. Once your account exists, you decide how much of each paycheck to contribute.

How contributions and matching work

You choose a percentage of your gross pay to contribute to your TSP each pay period. The money comes out before taxes are calculated, which lowers the income tax you owe that year. For 2024, the IRS allows you to contribute up to $23,500 per year if you are under age 50, or $31,000 if you are 50 or older (these limits change yearly). Your agency or branch will deduct your chosen amount automatically from your paycheck.

The federal government offers matching contributions to most employees and all military members. The match works like this: if you contribute at least 5 percent of your pay, the government contributes an additional 5 percent. If you contribute less than 5 percent, the government matches only what you put in. For example, if you earn $3,000 per pay period and contribute $150 (5 percent), the government adds another $150. This matching money is assistance programs and appears in your account automatically.

Investment options and how your money grows

Once money is in your TSP, you direct it into one or more investment funds. The TSP offers five core funds: the Government Securities Investment Fund (G Fund), which invests in U.S. Treasury bonds; the Fixed Income Index Investment Fund (F Fund), which tracks a broad bond index; the Common Stock Index Investment Fund (C Fund), which tracks the S&P 500; the International Stock Index Investment Fund (I Fund), which invests in foreign stocks; and the Small Capitalization Stock Index Investment Fund (S Fund), which focuses on smaller U.S. companies.

You can also choose one of the target-date funds, which automatically shift your money from stocks to bonds as you approach retirement. You pick the fund or funds that match your age and risk tolerance, and your contributions go there. You can change where your money is invested at any time, as often as you want, with no penalty or fee. Your money grows through investment returns — if the stock market rises, stock-based funds grow; if bonds perform well, bond funds grow.

Withdrawal rules and what happens to your money

You cannot withdraw money from your TSP before age 59½ without paying a 10 percent early withdrawal penalty, with a few exceptions. If you separate from federal service (leave your job), you can withdraw money without the penalty, though you still owe income tax on it. If you have a financial hardship, you may be able to take a loan against your TSP balance instead of withdrawing it, which lets you repay the money and keep it invested.

Once you turn 59½, you can withdraw money whenever you want without penalty. You can take a lump sum, set up monthly payments, or leave the money invested and withdraw it later. If you do not touch your TSP by age 73, you must begin taking required minimum distributions — the government requires you to withdraw a certain amount each year based on your age and account balance. When you die, your TSP balance goes to your named beneficiary or your estate.

TSP fees and why they matter

The TSP charges very low fees compared to most retirement accounts offered by private companies. There is no fee to open or maintain your account, no fee to move money between funds, and no fee to take a loan. The only costs are the expense ratios of the funds themselves — the annual cost to run each fund, expressed as a percentage of your balance. These ratios range from about 0.02 percent to 0.06 percent per year, which is far lower than the average mutual fund.

Lower fees mean more of your money stays invested and compounds over time. Over a 30-year career, the difference between a 0.04 percent fee and a 1 percent fee can amount to tens of thousands of dollars in your pocket instead of paid to the investment company. This is one reason the TSP is considered a strong retirement savings option for federal employees and military members.

How a TSP differs from other retirement accounts

A TSP is similar to a 401(k) plan that private companies offer, but it is run by the federal government and available only to federal workers and military members. Like a 401(k), contributions reduce your taxable income and money grows tax-deferred. Unlike a 401(k), a TSP has much lower fees, offers only a limited set of investment choices (which simplifies decision-making), and the government match is more generous — most private employers match only 3 to 4 percent, while the federal government matches up to 5 percent.

A TSP is not the same as a traditional IRA or Roth IRA, which are retirement accounts anyone can open at a bank or brokerage. An IRA has lower annual contribution limits ($7,000 in 2024, or $8,000 if you are 50 or older) and no employer match. However, you can have both a TSP and an IRA at the same time — they are separate accounts with separate contribution limits.

Frequently Asked Questions

Can I have a TSP if I work for a private company?

No. A TSP is available only to federal civilian employees, military members, and certain former military spouses. If you work in the private sector, you may have access to a 401(k), 403(b), or other employer retirement plan, or you can open an IRA on your own.

What happens to my TSP if I leave federal service?

Your TSP account stays open and your money remains invested. You can leave it there, roll it into an IRA or a new employer's retirement plan, or withdraw it (though you will owe income tax and possibly a 10 percent penalty if you are under 59½). You can also take a loan against the balance if you need money.

Can I borrow money from my TSP?

Yes. You can take a loan against your TSP balance and repay it through payroll deductions. The loan has no application fee, and you pay yourself back with interest rather than paying a bank. However, if you leave federal service before repaying the loan, the unpaid balance is treated as a withdrawal and you owe taxes and penalties.

How do I know how much money is in my TSP?

You can log into your TSP account online at tsp.gov using your username and password. You can see your current balance, contribution history, investment performance, and projected retirement income. You can also call the TSP customer service line at 1-877-968-3778 to speak with someone.

Is my TSP money safe if the stock market crashes?

Your money is invested in the funds you choose, so if you are invested in stock funds and the market drops, your balance will drop too. However, the G Fund (Treasury bonds) is backed by the U.S. government and does not lose value. You can move money to the G Fund or a target-date fund to reduce risk, or stay invested and wait for the market to recover.