The Thrift Savings Plan is a retirement savings account, but only federal employees, military members, and former government workers can open one

The Thrift Savings Plan (TSP) functions as a retirement account in the same way an IRA or 401(k) does—you contribute money, it grows tax-deferred, and you withdraw it in retirement. The key difference is who can use it. TSP is exclusively for federal civilian employees, active-duty military, Reserve and National Guard members, and people who have separated from federal service. You cannot open a TSP if you work in the private sector or for a state or local government.

TSP is run by the Federal Retirement Thrift Investment Board, a government agency. It offers low fees, a range of investment funds, and employer matching contributions for civilian federal employees. For military members, the matching structure is different but the account itself works the same way. If you leave federal service, you can keep your TSP account open and continue to manage it, or roll it into an IRA or another retirement plan.

Key Takeaways

  • TSP is a retirement account available only to federal employees, military members, and former government workers—not to private-sector employees.
  • Federal civilian employees receive employer matching contributions up to 5 percent of salary, similar to a 401(k) match.
  • TSP charges significantly lower fees than most private 401(k) plans and IRAs because it is government-run.
  • You can roll TSP funds into a traditional IRA or another retirement plan if you leave federal service, or leave the money in TSP.
  • Withdrawals before age 59½ generally trigger a 10 percent penalty plus income tax, with limited exceptions for federal employees who separate at 55 or older.

How TSP Works as a Retirement Account

TSP operates much like a 401(k). You contribute a percentage of your salary, the money is invested in funds you choose, and you do not pay income tax on the money or its growth until you withdraw it in retirement. For federal civilian employees, the government matches your contributions dollar-for-dollar up to 3 percent of salary, then 50 cents on the dollar for the next 2 percent—totaling a maximum 5 percent match if you contribute at least 5 percent of your pay.

Military members do not receive matching contributions in the same way. Instead, the Department of Defense automatically contributes 1 percent of base pay to TSP for all service members, and service members can receive additional matching contributions if they contribute themselves. The structure depends on when you entered service.

You choose how to invest your TSP balance from a menu of five core index funds: the Government Securities Fund (G Fund), the Fixed Income Index Fund (F Fund), the Common Stock Index Fund (C Fund), the Small Cap Stock Index Fund (S Fund), and the International Stock Index Fund (I Fund). You can also invest in target-date funds, which automatically shift from stocks to bonds as you approach retirement. TSP does not offer individual stocks or bonds.

TSP Contribution Limits and Tax Treatment

For 2024, you can contribute up to $23,500 of your salary to TSP if you are under 50, or $31,000 if you are 50 or older (the extra $7,500 is called a catch-up contribution). These limits are set by the IRS and change annually. The money you contribute reduces your taxable income for that year, meaning you pay less in federal income tax now.

When you withdraw money from TSP in retirement, you pay income tax on the full amount withdrawn—both your contributions and the growth. This is different from a Roth IRA, where you pay tax on contributions upfront but withdrawals in retirement are tax-free. TSP does offer a Roth option for federal employees hired after 2010, which works like a Roth IRA: contributions are made with after-tax dollars, but may have access to withdrawals are tax-free.

Withdrawal Rules and Penalties

You can withdraw from TSP starting at age 59½ without penalty. If you withdraw before that age, you generally owe a 10 percent early withdrawal penalty plus income tax on the amount withdrawn. However, federal employees who separate from service at age 55 or older can withdraw without the 10 percent penalty (though they still owe income tax). Military members who separate can withdraw without penalty if they are at least 50 years old and have completed 20 years of service.

TSP also allows loans against your balance. You can borrow up to 50 percent of your vested balance (or $50,000, whichever is less) and repay it over up to five years. If you leave federal service before repaying the loan, you typically have 90 days to repay it in full or it is treated as a withdrawal subject to tax and penalties.

Once you reach age 73, you must begin taking required minimum distributions (RMDs) from TSP, just as you would from a traditional IRA. The amount is calculated based on your age and account balance. If you are still working for the federal government at 73, you can delay RMDs until you actually retire.

TSP vs. IRAs and 401(k)s

TSP is similar to a 401(k) in structure but differs in cost and investment options. TSP expense ratios—the annual fees charged to manage the funds—are typically 0.02 to 0.05 percent, among the lowest available anywhere. A typical private 401(k) charges 0.5 to 1.5 percent or more. Over decades, this difference compounds significantly in your favor.

TSP offers fewer investment choices than most 401(k)s or IRAs. You cannot pick individual stocks or bonds, and you cannot invest in actively managed funds. This simplicity is intentional: it keeps costs down and prevents poor investment decisions. Many financial advisors view TSP's low fees and straightforward structure as advantages, especially for long-term savers.

If you leave federal service, you can roll your TSP balance into a traditional IRA or into a new employer's 401(k) plan. You can also leave the money in TSP and continue managing it there. Some people choose to leave TSP because they want more investment options; others leave because they want to consolidate accounts. There is no tax consequence to rolling over, as long as you do it correctly (either as a direct transfer or within 60 days of receiving a check).

What Happens to TSP If You Leave Federal Service

If you separate from federal employment, your TSP account does not close automatically. You can leave the money there indefinitely, continue to manage it online, and withdraw it whenever you choose (subject to the age and penalty rules above). You do not have to roll it over or take it out.

Many people choose to leave TSP in place because of the low fees. Others roll it into an IRA to consolidate their retirement savings or to gain access to more investment options. If you roll it over, you must do so within 60 days of receiving the funds, or the full amount becomes taxable income for that year.

If you are vested in your TSP account (which happens after three years of federal service for civilian employees, or when ready for military members), you own all the money you contributed plus all employer contributions and growth. If you separate before vesting, you forfeit the employer match, though you keep your own contributions.

Who Is may be able to access for TSP

TSP is open to federal civilian employees, members of the uniformed services (active duty, Reserve, and National Guard), and former federal employees who still have a TSP account balance. You cannot open a TSP account if you work for a private company, a state government, a local government, or a nonprofit organization. If you work for a federal contractor, you are not may be able to access unless you are also a federal employee.

If you are a federal employee, TSP enrollment is automatic for most people, though you can choose not to contribute. Military members must enroll separately through their service branch. If you are unsure whether you are may be able to access, check with your human resources office or your military personnel office.

Frequently Asked Questions

Can I have both a TSP account and an IRA?

Yes. You can contribute to both TSP and a traditional or Roth IRA in the same year, as long as your total contributions do not exceed the IRS limits for each account type. However, if you have a traditional IRA and earn too much money, your IRA contributions may not be tax-deductible. Check the IRS rules for your income level.

What happens to my TSP if I die?

Your TSP balance passes to your designated beneficiary outside of probate. You name your beneficiary when you open the account and can change it anytime. If you do not name a beneficiary, the money goes to your estate and may be subject to probate and estate taxes.

Can I withdraw from TSP while still working as a federal employee?

Generally, no. You cannot withdraw from TSP while you are still employed by the federal government, except through a loan. Once you separate from service, you can withdraw at any time, though withdrawals before age 59½ may trigger a 10 percent penalty.

Is TSP the same as Social Security?

No. TSP is a retirement savings account you control; Social Security is a separate federal benefit based on your work history. Federal employees pay into Social Security just like private-sector workers, and they receive Social Security benefits in retirement. TSP is additional savings on top of that.

What if I roll my TSP into an IRA and then want to roll it back?

Once you roll TSP into an IRA, you cannot roll it back into TSP. You can roll an IRA into a new employer's 401(k) or similar plan, but TSP does not accept incoming rollovers from IRAs or other plans. Plan your rollover carefully, or consider leaving the money in TSP if you think you might want to return to federal service.