Below are brief answers to some of the most common questions related to Thrift Savings Plan. Please be sure to visit www.tsp.gov for a more detailed, individualized explanation of rules/regulations.
As an employee, you can specify how much you choose to save via payroll deduction. Each year the IRS will identify how much you are allowed to contribute to a tax-deferred savings plan like TSP. Please note: there are special considerations for persons 50 years of age and older and members of the uniformed services.
All of your contributions are made before taxes and grow tax-deferred until you withdraw your funds to supplement your income in retirement. You will be taxed when you withdraw the money based on the tax bracket that you were in according to your ordinary income at that time.
The Thrift Savings Plan (TSP) is a supplement for employees covered by the Federal Employee Retirement System (FERS), along with a basic annuity benefit and Social Security. FERS and The Civil Service Retirement System (CSRS) are defined benefit plans. This means that you are paid a pension based on your employment record and wage. TSP is a defined contribution plan, meaning it is designed to supplement your retirement income with tax-deferred savings that you accumulate over your career.
There are 5 funds available within TSP:
In addition to the 5 basic funds listed below, you also have access to the TSP Lifecycle Fund (L Fund). The L Fund is comprised of a combination of the 5 funds listed above, which are allocated according to your expected time horizon up to the time of your retirement. It is formulated to take more risk the further you are from your retirement date and less risk as you approach your retirement. It is adjusted over time toward a more conservative portfolio or asset allocation. This method can be used if you do not desire to select and adjust your fund choices over time on your own. This fund will adjust as the government’s contracted firm, BlackRock, sees fit for you.
My TSP Guide is an alternative to this. You can use our guidance that will proactively monitor and recommend adjustments based on current market conditions, avoiding risk and taking advantage of opportunity.
You may apply for loans from your retirement account. You may take a loan out for any reason and pay it back over one to five years or you can take a loan to buy a primary home that can be paid back over one to 15 years. The loans can only be taken from money you have contributed plus any of its growth (not matching funds). The interest cost will be whatever the G Fund note is during the month before you request the loan. The interest cost is added back into your own TSP account. There are a lot of stipulations regarding TSP loans. For more information always refer back to www.tsp.gov.
G Fund is a guaranteed investment using U.S. Treasury. This fund produces an average income from the bonds that are within the portfolio. Bonds generally under-perform stocks and U.S. Treasury bonds pay less than corporate bonds. However, this fund does not participate in interest rate risk.
F Fund is an aggregate bond fund. This means it invests in all kinds of bonds- U.S. government, corporate, high-quality, etc.. You will receive the average income the bonds pay. Unlike the G Fund, this fund participates with interest rate risk. If rates go up, the values of the fund shares go down. If rates go down, the value of the fund goes up.
C Fund is a stock that invests in the top 500 largest companies within the United States.
S Fund is a stock fund that invests in stocks that are within the United States and includes the next 4,500 companies that are smaller than those of the C Fund.
I Fund invests in companies’ stocks that are domiciled in Europe, Australia, or Far East countries.
L Funds, of which there are many, all use the same 5 funds. The investments are decided for you based on the time horizon of your planned retirement date; however, you can also leverage the L Funds to own all 5 of the funds listed above in different percentages/degrees.