A Thrift Savings Account is a retirement savings plan for federal employees, military members, and some other government workers

A Thrift Savings Account (TSA), also called a TSP, is a retirement investment account run by the federal government. It is available to civilian federal employees, members of the military, and certain other groups like the Peace Corps and AmeriCorps. The account works similarly to a 401(k) that a private employer might offer, but it is managed by the Federal Retirement Thrift Investment Board, not a private company.

You contribute money from your paycheck before taxes are taken out (in most cases), and that money grows over time through investment options you choose. When you leave federal service or reach retirement age, you can withdraw the money. The main difference from a regular savings account is that a TSA is designed specifically for long-term retirement saving, with tax advantages and investment growth built in.

Key Takeaways

  • A Thrift Savings Account is only available to federal employees, military members, and certain government workers—not to the general public.
  • You contribute pre-tax dollars from your paycheck, which reduces your current taxable income and lets your money grow without annual tax on the gains.
  • You choose how your money is invested among five core funds or target-date funds based on when you plan to retire.
  • You cannot withdraw money before age 59½ without penalty in most cases, even if you leave your job.
  • The account has lower fees than most 401(k) plans because it is government-run rather than managed by a private financial company.

Who can open a Thrift Savings Account

You are may be able to access to open a TSA if you are a civilian employee of the federal government, a member of the uniformed services (Army, Navy, Air Force, Marine Corps, Coast Guard, or Space Force), or an employee of certain other organizations like the Peace Corps, AmeriCorps, or the Federal Reserve. If you work for a state or local government, a private company, or are self-employed, you cannot open a TSA.

If you are may be able to access, your employer will set up a TSA for you automatically when you start work. You do not have to request one. You then decide how much to contribute and where to invest that money. If you are military, you may be automatically enrolled at a small contribution rate unless you choose a different amount.

How contributions and tax treatment work

When you contribute to a TSA, the money comes out of your paycheck before federal income tax is calculated. This means your taxable income for the year is lower, which usually results in a smaller tax bill. You pay taxes on the money later, when you withdraw it in retirement.

There are annual limits on how much you can contribute. For 2024, the limit is $23,500 for most workers, though military members and some federal employees can contribute more through a special catch-up provision if they have unused contribution room from prior years. Your employer will help you set up payroll deductions to reach whatever amount you choose, up to the limit.

If you leave federal service before retirement, your TSA stays in place. You do not have to close it or move the money. It continues to grow, and you can add to it only if you return to federal service. Once you separate, you can no longer make contributions, but the money already in the account remains invested.

Investment options and how your money grows

When you open a TSA, you choose how to invest your contributions. You have five core investment funds to pick from: the Government Securities Investment Fund (G Fund), the Fixed Income Index Investment Fund (F Fund), the Common Stock Index Investment Fund (C Fund), the International Stock Index Investment Fund (I Fund), and the Small Capitalization Stock Index Investment Fund (S Fund). Each fund invests in different types of securities, with different levels of risk and potential return.

You can also choose a target-date fund, which automatically adjusts its mix of investments as you get closer to retirement. For example, a target-date fund for someone retiring in 2045 will start with more aggressive investments and gradually shift to more conservative ones as 2045 approaches. This removes the need to manually rebalance your account over time.

Your money grows through investment returns—dividends, interest, and capital gains—and you do not pay taxes on those gains each year. Taxes are deferred until you withdraw the money. This tax deferral is one of the main advantages of a TSA over a regular savings account.

Withdrawal rules and penalties

You cannot withdraw money from your TSA before age 59½ without paying a 10 percent early withdrawal penalty, with limited exceptions. Those exceptions include withdrawals due to financial hardship (which requires approval), withdrawals after you separate from federal service if you are age 55 or older, or withdrawals for a may have access to medical expense. If you withdraw before age 59½ without meeting an exception, you owe the 10 percent penalty plus income tax on the amount withdrawn.

Once you reach age 59½, you can withdraw money without penalty. You can take a lump sum, set up monthly payments, or leave the money invested and withdraw it gradually. You must begin taking withdrawals by age 73 (called a required minimum distribution), though you can take more than the minimum at any time.

When you separate from federal service, you have options for what to do with your TSA. You can leave it where it is, roll it into an Individual Retirement Account (IRA) at a bank or brokerage, or roll it into a new employer's retirement plan if you move to a job that offers one. Each option has different rules about fees and future contributions, so it is worth understanding the differences before you decide.

Fees and how a TSA compares to other retirement accounts

One major advantage of a TSA is that it has very low fees. The annual expense ratios for the core funds range from about 0.02 percent to 0.06 percent per year, which is far lower than the average 401(k) plan offered by private employers. This means more of your money stays invested and working for you instead of going to fund managers and administrators.

A TSA is similar to a 401(k) in structure—both are employer-sponsored retirement plans with pre-tax contributions and tax-deferred growth. The main differences are that a TSA is only for government workers, has lower fees, and offers a more limited set of investment choices (which some people see as an advantage because it simplifies decision-making). A TSA is not the same as a traditional savings account, which has no investment component and no tax advantages for retirement saving.

What happens to your TSA if you change jobs

If you leave federal service and move to a private-sector job, your TSA does not disappear or get closed automatically. The money stays invested in your chosen funds. You cannot make new contributions once you separate, but the account continues to grow. You can check your balance and change how your existing money is invested through the TSA website at any time.

Many people choose to roll their TSA into an IRA when they leave federal service. This gives you more investment options and may lower your fees further, depending on where you open the IRA. You can also leave the money in the TSA if you are satisfied with the funds available and the low fees. There is no requirement to move it, and no time limit on when you must decide.

Frequently Asked Questions

Can I borrow money from my Thrift Savings Account?

Yes, you can take a loan from your TSA if you are still a federal employee. The loan must be repaid within five years (or up to 15 years if you are buying a primary residence), and you pay interest back into your own account. Once you separate from federal service, you can no longer take new loans, though existing loans must still be repaid.

What is the difference between a TSA and an IRA?

A TSA is employer-sponsored and only available to government workers, while an IRA is available to anyone with earned income. An IRA has higher annual contribution limits in some cases and more investment options. A TSA has much lower fees. Both offer tax-deferred growth, though the tax treatment at withdrawal differs between traditional and Roth versions of each.

Can I have a Thrift Savings Account if I work for a state or local government?

No. A TSA is only for federal civilian employees, military members, and employees of certain federal agencies. State and local government workers are not may be able to access. They may have access to a 403(b) or 457 plan instead, which are similar retirement savings plans run by their employers.

What happens to my TSA if I die before retirement?

Your TSA becomes part of your estate and passes to your beneficiary or beneficiaries according to the designation you made when you opened the account. If you did not name a beneficiary, the money goes to your spouse, or if you have no spouse, to your children or estate according to federal law. Your beneficiary can withdraw the money or roll it into their own IRA.