Thrift Savings Plan (TSP): Key Features & Benefits for Federal Employees

The thrift savings plan is a unique type of retirement account that is available to United States Civil Service employees. Many people like this plan because of some of the features that it offers. Here are some of the more popular features of the thrift savings plan. 

1. Matching Contributions

Matching contributions are one of the most popular features of the thrift savings plan. Employees are eligible to put part of their own paycheck into the account and then matching contributions are made in addition to this. The first part of the matching contribution is the Agency Automatic Contribution. This amounts to a contribution of 1 percent of your annual salary. This contribution is made automatically into your thrift savings plan. 

In addition to the Agency Automatic Contribution, you can get contributions that match what you contribute on a dollar-for-dollar basis up to 3 percent of your annual salary. Beyond that, you will receive a 50 percent matching contribution up to 5 percent of your annual salary. This means that the maximum you can get with matching contributions is 5 percent of your annual pay between all of the contribution types.

2. Investment Options

With the thrift savings plan, you will be able to choose from a variety of investment options for your money. Currently, there are 10 different funds for you to put your money into. One of the most popular choices to invest in is the G Fund. This fund is made up of a variety of government-backed securities. If you are a member of the general public, you will not be able to invest in these securities. Only government employees that participate in the plan can invest in it. It is an extremely safe fund as it is guaranteed by the federal government. 

With the thrift savings plan, you can also invest in several different life cycle funds. These are mutual funds that invest in a variety of securities. The asset allocation of the funds automatically gets more conservative as you get closer to retirement. This is a great way to put your retirement planning on auto pilot. 

3. In-Service Withdrawal

This type of plan also allows for in-service withdrawals. This means that you can withdraw money from the plan without paying any penalties or fees. You are only allowed to make an in-service withdrawal once and you can only withdraw a maximum of $1000. 

4. Immediate Entry

When you start working, you will be able to start contributing to this plan immediately. In the corporate world, most retirement plans carry with them a waiting period before you can start contributing. This limits the amount of people that can contribute. However, with the thrift savings plan, you will not be bound by any such restrictions. In the past, you had to wait for a year before you could start receiving matching contributions. Now, this is not even an issue as you can start receiving matching contributions immediately when you start work.