What Is The Thrift Savings Plan?

If you need to save money for retirement as a Federal Employee, one way is to use the Thrift Savings Plan. This plan makes it easy for you to make contributions so your money can grow over time. Below is information about the Thrift Savings Plan (TSP) for both FERS and CSRS employees.

With a TSP, money is withheld from your payroll. If you are a CSRS employee there will be no government contributions. If you are an FERS employee, your agency:

• Contributes up to 1% of your basic pay each pay period
• Matches your contributions dollar-for-dollar for the first 3% that you invest
• Adds 50 cents per dollar of the next 2% of your salary invested
• Does not match contributions over 5% of your salary

There is a dollar cap that is known as the elective deferral limit, which is set at $19,500 for 2021 (same as it was for 2020). However, agency-matching TSP contributions do not count toward this limit, and nor does the 1% automatic deduction. Those under the age of 50 will not be able to make contributions exceeding this limit.

If you are over the age of 50, catch-up contributions can be used for a separate annual limit ($6,500 for 2021). There will be no matching contributions if this is a catch-up investment.

If you change your mind at a later date you can change the investment level you chose. You can also change how the ongoing investments are distributed and have the ability to transfer money among the funds twice per month.

If you leave the company that you work for, you will not be able to make any investments in the TSP account. You can, however, still move money around among your funds. If you need to withdraw any money after you leave, you will have many options to choose from. The money can also be left in the TSP, where it will accrue interest until you retire.

You will have only limited access to the funds before you retire. You will have access to your money through a loan program; money can only be withdrawn under certain circumstances. The investments you make are pre-tax, but if you withdraw money it will be taxed. In a Roth IRA, investments are made after tax, but money that is withdrawn is tax-free as long as you meet certain conditions.

For a new hire or for those who are rehired, 5% of their salary is invested by default. You can choose a different investment level, however. If you choose not to use any funds to invest, the money will automatically be put into the appropriate fund, which will be based on the assumption that you would start withdrawing money after you turn 62.

TSP can sometimes be confusing for Federal Employees looking to maximize their retirement benefits. At Bespoke Educators Group, we believe that every Federal Employee has the right to fully understand their benefits at no cost. Our Federal Benefit Specialists are here to help you and answer any questions you may have about your unique TSP situation.