The Federal Thrift Savings Plan
What is the Federal Thrift Savings Plan (TSP)?
The Federal Thrift Savings Plan (TSP) is a tax-deferred retirement savings and investment plan set up to help federal civilian employees and military personnel save for retirement. The Federal Retirement Thrift Investment Board, an independent government agency, administers it. The TSP is a defined contribution plan. This means that employees and service members are eligible to contribute at least part of their salary annually to the plan, and the government may match those contributions in full or in part. Contributions are invested and distributed to the employee or service member at retirement or when the employee or service member separates from government service or distributed to the employee's or service member's survivors if the employee or service member dies.
This discussion is just an overview of the program. For more specific information and details visit the official government website tsp.gov.
Who is eligible to participate in the TSP?
Most U.S. government employees are eligible to participate in the TSP:
Federal Employees Retirement System (FERS) employees (generally if hired on or after January 1, 1984)
Civil Service Retirement System (CSRS) employees (generally hired before January 1, 1984, and who did not convert to FERS)
Members of the uniformed services (active duty or Ready Reserve) including members of the Army, Air Force, Marine Corps, Navy, and
Coast Guard, as well as uniformed members of the Public Health Service and the National Oceanic and Atmospheric Administration
Civilians in certain other categories of government service
Enrollment and Contributions to a TSP Account
Employee Contributions
FERS employees hired on or after October 1, 2020, are automatically enrolled in the TSP by their agency, and 5% of their basic salary is deducted from their paycheck each pay period and deposited into the traditional balance of their TSP account unless the employee makes an election to stop or change the contribution.
CSRS employees have their accounts established by their agency after they make a contribution election using their agency's electronic payroll system or after completing an election form.
Blended Retirement System (BRS) service members are automatically enrolled in the TSP after 60 days of service, and 5% of their basic pay is deducted from their paycheck each pay period and deposited into the traditional balance of their TSP account unless the servicemember makes an election to stop or change the contribution. BRS servicemembers who stopped their contributions during the year will automatically be reenrolled at 5% on January 1.
Non-BRS servicemembers have their accounts established by their service after they make a contribution election using their agency's electronic payroll system or after completing an election form.
FERS or CSRS employees rehired on or after October 1, 2020, are automatically enrolled in the TSP, and 5% of their basic salary is deducted from their paycheck each pay period and deposited into the traditional balance of their TSP account.
You may make traditional or Roth contributions to your TSP account. Generally, you may contribute between 1% and 100% of your basic pay to your thrift account each pay period, up to the IRS elective deferral limit for the year. In 2025, you can contribute up to $23,500 ($31,000 if you're age 50 to 59 or 64 and older or $34,750 if you turn 60, 61, 62, or 63 during the year). All contributions must be made through payroll deduction. Service members may also elect to contribute 1 to 100% of any incentive pay, special pay, or bonus pay (even if you're not currently receiving it), as long as you elect to contribute at least 1% from your basic pay.
If you make traditional contributions, these go into the TSP before tax withholding (pre-tax). This may reduce the income tax you pay on your earnings now. But when you take money out of your TSP in the future, you will pay taxes on both your contributions and earnings.
You may designate all or part of your elective deferrals as Roth contributions. Roth contributions are made on an after-tax basis, just like Roth IRA contributions. Unlike pre-tax contributions to the TSP, there's no up-front tax benefit, but if certain conditions are met, your Roth contributions and earnings are entirely free from federal income tax when distributed from the plan.
Separate accounts are established within the TSP (the "Roth accounts") to track each employee's Roth contributions and any gains or losses on those contributions. The taxation of distributions from the Roth account is also determined separately from any other plan dollars.
Caution: If you participate in another tax-deferred plan, such as a 401(k) or 403(b) plan, your total elective deferrals to all of your plans cannot exceed the $23,500 limit (plus allowable catch-up contributions) in 2025. However, if you also participate in a Section 457(b) plan, your contributions to the TSP are not limited by any of your contributions to your Section 457(b) plan.
Tip: Military personnel who receive tax-exempt pay (i.e., combat zone pay) can also contribute some or all of the tax-exempt pay to the TSP Such contributions will also be tax-exempt.
Caution: Military personnel cannot make catch-up contributions from tax-exempt pay, incentive pay, special pay, or bonus pay.
Government contributions
If you are covered under FERS or BRS, the government contributes an amount equal to 1% of the basic pay you earn each pay period to your thrift account whether you contribute a portion of your compensation to the plan or not. These contributions are referred to as Agency (or Service) Automatic contributions. You don't have to contribute any money to your TSP to receive them, but they are subject to vesting.
If you are covered under FERS or are an eligible BRS participant, and elect to contribute a portion of your pay to the plan, you will also receive Agency (or Service) Matching Contributions. When you become eligible, your agency or service will match your contributions up to 5% of the basic pay that you contribute each pay period. The first 3% of basic pay you contribute is matched dollar-for-dollar, and the remaining 2% is matched 50 cents on the dollar. If you stop your contributions, the matching contributions will also stop.
Tip: If you are an employee covered under CSRS or are a non-BRS service member, the government generally doesn't contribute anything to your plan.
Caution: Although you are always vested in contributions you make to the plan and Agency Matching Contributions (as well as any attributable earnings), most FERS and BRS employees are vested in Agency (or Service) Automatic Contributions only after a certain number of years. This means that if you leave federal service before you become vested, you won't be entitled to receive any of the automatic contributions or earnings in your account. However, if you die before becoming vested, all money in your TSP account will be automatically vested, and your designated beneficiary will be entitled to receive all funds in your account.
TSP investment options
You can invest any percentage of future contributions to your account to a TSP "Lifecycle" L Fund, or to any of the five individual funds available. The TSP L Funds are designed for individuals who don't feel comfortable selecting or managing their own investment choices. You simply select the L Fund that's appropriate for your time horizon. The L Fund that you select invests in a mix of the individual funds available under the TSP, and adjusts the mix to reflect a lower tolerance for risk as your investment time horizon approaches.
Instead of an L Fund, you can also invest directly in any or all of the five individual funds offered under the TSP: the Government Securities Investment Fund (G Fund), the Fixed Income Index Investment Fund (F Fund), the Common Stock Index Investment Fund (C Fund), the Small Cap Stock Index Investment Fund (S Fund), and the International Stock Index Investment Fund (I Fund).
Tip: Although you can contribute either a percentage of your pay each pay period or a fixed dollar amount to the TSP, you cannot specify that you want a particular dollar amount to go to an individual fund. You can only state what percentage of your contribution you want to go to each fund.
Caution: All investing involves risk, including the possible loss of principal.
Distribution of TSP account funds
In-service withdrawals
Participants can take a one-time age-based withdrawal from the TSP upon reaching age 59½. All or a portion of the participant's vested account balance may be withdrawn at that time. If a participant elects to take a partial account withdrawal, the participant will not be eligible for a partial account withdrawal upon separating from service.
Participants can also make in-service withdrawals in cases of financial hardship. Specific requirements and limits apply, and each time a participant takes a hardship distribution, the participant is barred from making another hardship distribution for a period of six months. Other rules also apply.
Caution: Participants should consider carefully the consequences of an in-service distribution. Distributions from your pre-tax account are subject to federal income tax, and an additional 10% penalty tax will generally apply to distributions made prior to age 59½ (there are exceptions). The taxation of in-service withdrawals from an employee's Roth 401(k) account depends on whether the distribution is a qualified or nonqualified withdrawal (discussed in more detail below). Consideration should also be given to the overall depletion of the participant's retirement savings.
Caution: If you are married, your spouse must be notified of any request for an in-service distribution, and in most cases, must consent.
Partial withdrawals upon separation
If you separate from service, you can take a distribution of $1,000 or more from the TSP, leaving the remaining balance in your account until you decide to withdraw it. You can take only one partial distribution from the account. If you had previously made an age-based withdrawal after reaching age 59½, you do not have this option.
Full withdrawal upon separation
When you separate from service, you can elect to withdraw your full TSP account in a single "lump-sum" distribution, in a series of specified payments, or through the purchase of a life annuity from an outside vendor annuity.
Tip: You must have at least $3,500 in your account at the time the TSP uses the money to purchase an annuity; if you don't, you will receive a lump-sum payment.
Annuity payment amounts
Several factors determine how much your monthly annuity payments will be. These factors are how large your account balance is, the interest rate at the time the TSP purchases your annuity, the performance of your investment fund, your age (and your joint annuitant's age if applicable), and the annuity option you elect. The TSP website (www.tsp.gov) has a calculator you can use to project your future account balance, and you can view tables of approximate annuity payments.
Tax considerations
Income tax
The money you contribute to your TSP account on a pre-tax basis is taken out of your pay before federal (and most state) taxes are calculated, and investment earnings are tax-deferred. Therefore, all of the money in your TSP pre-tax account is taxed as ordinary income when you receive it.
Income Tax — Roth Contributions
In general
Because your Roth contributions are made on an after-tax basis, there is no up-front tax benefit. They're included in your gross income at the time you contribute to the TSP. And because they're made on an after-tax basis, your Roth contributions are tax-free when distributed from the plan. Investment earnings on your Roth contributions grow tax-deferred while they remain in the plan. Whether they're subject to tax when distributed depends on whether the distribution is qualified or nonqualified.
Qualified distributions
If you receive a qualified distribution from your Roth account, the entire amount distributed, both the Roth contributions and investment earnings, is free from federal income tax. A qualified distribution is a payment from your Roth account that meets both of the following requirements:
The payment is made after you turn age 59½, become disabled, or die, and
The payment is made after the end of the five-year period that starts with the year you make your first Roth contribution to the plan
Nonqualified distributions
If a payment doesn't satisfy the conditions for a qualified distribution, the portion of the payment that represents the return of your Rot contributions will still be tax-free, but the portion of the payment that represents earnings on those contributions will be subject to income tax and a potential 10% penalty tax (unless an exception applies).
A distribution that's made before the five-year waiting period has elapsed will always be a nonqualified distribution. A distribution that's made prior to age 59½, disability, or death (for example, a distribution upon your termination of employment before attaining age 59½) will also always be a nonqualified distribution.
Early withdrawal
Any taxable amount paid to you from your TSP account before you reach age 59½ may be subject to a 10% penalty tax (in addition to the ordinary income tax that you pay on the TSP distribution). However, this additional tax does not apply in certain situations, including the following (other exceptions also apply):
You separate from government service during or after the calendar year in which you reach age 55 (age 50 or after 25 years of service for qualified public safety employees)
You choose to receive your account balance as an annuity or in monthly payments based on your life expectancy
You retire on disability
The payments are made because of your death
Saver's tax credit (tax credit for IRAs and retirement plans)
Certain low- and middle-income taxpayers qualify for the saver's tax credit (also known as the tax credit for IRAs and retirement plans). If you participate in the TSP and meet the income requirements, you may be eligible for a tax credit of up to $1,000 on your federal income tax return for each year you participate in the plan.
Questions & Answers
Can you borrow money from your TSP?
You may be able to borrow money from your account. However, you'll be expected to repay the loan right away if you leave federal service. The interest you pay will be the G Fund rate in effect at the time your loan application is received. If your loan is considered a general-purpose one, you won't be required to document or specify the purpose of your loan. Documentation is required for residential loans only. For more information, contact your personnel office.
Can you roll over an individual retirement account to your TSP?
Whether you are an active or separated federal employee, you can roll over (i.e., transfer) money from a qualified retirement plan or a traditional IRA to your existing TSP account. Money that you are rolling over must be considered an "eligible rollover distribution." If you are separated from service, you can still roll over money to your TSP account unless you have already made a full withdrawal of your account or are receiving monthly payments.
Caution: If you are considering a rollover, you should check with the administrator of the plan from which you wish to transfer the money (or your tax advisor) to ensure that the funds are eligible for rollover, and that you follow certain rules. Rollovers consist only of pre-tax money. They will be subject to income tax when they are eventually paid to you from your TSP account.
Can you roll over a distribution from your TSP to another plan?
If you (the plan participant) receive an eligible rollover distribution from your TSP, you may roll over all or part of it to an IRA or to another qualified retirement plan, tax-sheltered annuity plan [Section 403(b) plan], or Section 457 plan. (Special rules apply to TSP distributions received by your beneficiaries following your death.) Special rules apply to rollovers from your Roth account.
Caution: When considering a rollover, to either an IRA or to another employer's retirement plan, you should consider carefully the investment options, fees and expenses, services, ability to make penalty-free withdrawals, degree of creditor protection, and distribution requirements associated with each option.
Prepared by Broadridge Advisor Solutions. © 2025 Broadridge Financial Services, Inc.
