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

A Thrift Savings Plan (TSP) is a retirement investment account run by the federal government for people who work for the federal government or serve in the military. It is not a regular savings account—it is a long-term retirement account similar to a 401(k) that a private company might offer. You put money in, choose how it gets invested, and the account grows tax-deferred until you withdraw it in retirement.

The account is managed by the Federal Retirement Thrift Investment Board, a separate agency that handles only TSP accounts. You do not open a TSP through a bank. You open it through your federal employer's human resources office or through the military's finance office, depending on who you work for. The money stays in the TSP system until you leave your job or reach retirement age.

TSP accounts are available to civilian federal employees, members of the uniformed services (active duty, reserve, and National Guard), and certain former spouses of military members who meet specific conditions. If you work for a state or local government, a private company, or are self-employed, you cannot open a TSP—you would use a 401(k), IRA, or SEP-IRA instead.

Key Takeaways

  • A TSP is a retirement investment account for federal employees and military members only, not a regular savings account.
  • You contribute money from your paycheck before taxes, which lowers your taxable income for the year.
  • The federal government may match part of your contribution if you are a civilian federal employee, similar to employer matching in a 401(k).
  • You choose from five investment funds—government securities, bonds, stocks, and international stocks—and can change your allocation at any time.
  • You cannot withdraw money before age 59½ without penalty unless you leave your job, separate from the military, or meet other specific exceptions.

How contributions work and what the government matches

You contribute to a TSP by having money taken directly from your paycheck before income tax is calculated. This is called a pre-tax contribution, and it reduces the amount of income you owe taxes on that year. For example, if you earn $50,000 and contribute $5,000 to your TSP, you only pay income tax on $45,000.

If you are a civilian federal employee, the government will match part of what you contribute. The match works like this: the government contributes 1 percent of your salary automatically, even if you contribute nothing. If you contribute between 1 and 5 percent of your salary, the government matches dollar-for-dollar up to 5 percent. So if you contribute 5 percent, the government also contributes 5 percent—that is 10 percent of your salary going into your account each pay period. If you contribute less than 5 percent, you get a smaller match. If you contribute more than 5 percent, the government still only matches up to 5 percent.

Military members do not receive matching contributions. Instead, they receive an automatic government contribution of 1 percent of their base pay, plus a separate contribution called the Blended Retirement System (BRS) continuation pay if they have completed certain years of service. The rules for military contributions are different and depend on when you joined.

For 2024, you can contribute up to $23,500 per year to your TSP if you are under age 50, or $31,000 if you are 50 or older (the extra $7,500 is called a catch-up contribution). These limits change slightly each year. You can see the current limits on the TSP website.

The five investment funds and how to choose

When you open a TSP, you do not just put money in a savings account. You choose how to invest it by selecting from five different funds. Each fund invests in different types of securities, and they carry different levels of risk and potential growth.

The five funds are: the Government Securities Fund (G Fund), which invests in short-term U.S. Treasury securities and is the safest option; the Fixed Income Fund (F Fund), which invests in bonds and is lower-risk; the Common Stock Index Fund (C Fund), which tracks the S&P 500 and is moderate-risk; the Small Cap Stock Index Fund (S Fund), which invests in smaller U.S. companies and is higher-risk; and the International Stock Index Fund (I Fund), which invests in stocks outside the United States and is higher-risk.

You can split your contributions among these five funds in any way you choose, and you can change how your money is divided at any time without penalty. Many people choose a mix based on how many years until they retire—younger workers often put more in stock funds because they have time to recover from market downturns, while workers closer to retirement often put more in the G Fund or F Fund for stability.

The TSP also offers Lifecycle Funds, which automatically adjust your mix of investments as you get closer to retirement. You pick a target retirement year, and the fund shifts from stocks toward bonds and Treasury securities on its own. This is a hands-off option if you do not want to manage your allocation yourself.

Withdrawal rules and early withdrawal penalties

You cannot take money out of your TSP before age 59½ without paying a 10 percent penalty on the amount withdrawn, plus income tax on that amount. This is different from a regular savings account, where you can withdraw money whenever you want.

There are a few exceptions. If you leave your federal job or separate from the military, you can withdraw money from your TSP without the 10 percent penalty, even if you are younger than 59½. You will still owe income tax on the withdrawal, but not the early withdrawal penalty. If you are still working for the federal government or military, you cannot withdraw money just because you want to—you have to leave the job first.

Another exception is the TSP loan. You can borrow money from your own TSP account and pay it back to yourself with interest. The loan does not count as a withdrawal, so there is no tax or penalty. However, if you leave your job before you pay back the loan, the unpaid balance is treated as a withdrawal and you owe taxes and penalties on it.

Once you turn 59½, you can withdraw money from your TSP without penalty, whether you are still working or not. You can also set up monthly payments or a one-time withdrawal. At age 73, you must start taking Required Minimum Distributions (RMDs)—the government requires you to withdraw a certain amount each year based on your age and account balance.

TSP versus other retirement accounts for federal employees

Federal employees have access to both a TSP and a Federal Employees Retirement System (FERS) pension. These are separate. The FERS pension is a may provide monthly payment you receive in retirement based on your salary and years of service. The TSP is an additional savings account you control. Most federal employees use both—the FERS pension provides a base income, and the TSP provides extra retirement savings.

If you are a federal employee, you should contribute to your TSP to get the government match, because that match is assistance programs. Even if you contribute just 5 percent to get the full match, that is an immediate 5 percent return on your money, which is hard to beat in any other investment.

Military members do not have a traditional pension like FERS (unless they joined before 2018). Instead, they have the Blended Retirement System, which combines a smaller pension with TSP contributions. Military members should also contribute to their TSP to take advantage of the government contribution.

How to open a TSP and manage your account

To open a TSP, contact your agency's human resources office or your military finance office. They will give you the forms to complete and explain how to set up your contributions. You do not open the account yourself online—your employer sets it up for you once you are hired.

Once your account is open, you can manage it through the TSP website at tsp.gov. You can log in to see your balance, change how your money is invested, update your contribution amount, and set up withdrawals. You can also call the TSP customer service line at 1-877-968-3778 if you have questions.

The TSP website also has educational materials, calculators to estimate your retirement savings, and detailed information about each fund's performance. You can download the TSP handbook, which explains all the rules in detail. If you are new to investing, the TSP website has beginner guides that explain how the funds work and how to choose an allocation.

Frequently Asked Questions

Can I have a TSP and an IRA at the same time?

Yes. A TSP and an IRA are separate accounts, and you can contribute to both in the same year. However, if you have a traditional IRA and earn too much money, you may not be able to deduct your IRA contributions on your taxes. Check the IRS rules for your income level.

What happens to my TSP if I leave my federal job?

Your TSP stays in the TSP system. You can leave it there and continue to manage it online, or you can roll it over to an IRA or another employer's retirement plan. You can also withdraw it, but you will owe income tax on the amount. You do not have to decide immediately—you can leave it in TSP for as long as you want.

Can I borrow from my TSP if I am still working?

Yes, if you are still a federal employee or military member, you can take out a TSP loan. You borrow from your own account and pay yourself back with interest. The interest goes back into your TSP account. If you leave your job before the loan is repaid, the unpaid balance becomes a taxable withdrawal.

Is my TSP protected if my employer goes bankrupt?

Yes. The TSP is a government account, not held by a private company, so it is not affected by employer bankruptcy. Your money is in a separate trust managed by the Federal Retirement Thrift Investment Board, independent of your employer's finances.

Can I change my investment allocation if the market drops?

Yes. You can change how your money is invested at any time without penalty or tax consequences. However, financial advisors generally recommend staying invested through market downturns rather than moving money to safer funds when prices are low, because you lock in losses that way.