Thrift Savings Plans (TSPs)

What is a Thrift Savings Plan?

A Thrift Savings Plan is a defined-contribution plan that is similar to a 401k, but for federal employees and service members instead of the private sector. Just like with 401k plans, there are Traditional and Roth options, and yearly contribution limits.

Participants can build their Thrift Savings Plans (TSPs) from 5 individual funds, lifecycle funds, and a mutual fund option:

• Common Stock Index Investment Fund (C Fund): Intended to match the performance of the S&P 500 Index.
• Small Cap Stock Index Investment Fund (S Fund): Supposed to match the performance of the Dow Jones U.S. Completion Total Stock Market Index (a subindex comprised of small-to-medium U.S. companies not accounted for in the S&P 500 Index).
• International Stock Index Investment Fund (I Fund): Aims to match the performance of the MSCI ACWI ex USA ex China ex Hong Kong Index.
• Fixed Income Index Investment Fund (F Fund): Intended to match the performance of the U.S. bond market (more specifically, the Bloomberg U.S. Aggregate Bond Index).
• Government Securities Investment Fund (G Fund): Meant to preserve investment principal and provide returns above those of Treasury bills and other short-term U.S. Treasury securities.
• Lifecycle Funds (L Funds): A group of 11 funds that are made up of different allocations of the C, S, I, F, and G Funds. (These work the same way that target date funds do.)
• Mutual Fund Window: An option that allows the participant to transfer some of the money from a TSP account into a separate investment account offered through a mutual fund window vendor. (Read more about associated fees and eligibility requirements for this option here.)

What is the difference between a Thrift Savings Plan and a 401k?

The main difference between the two plans is that Thrift Savings Plans (TSPs) are only offered to the public sector while 401ks are for the private sector. Contribution policies also differ, though. FERS (Federal Employees’ Retirement System) and BRS (Blended Retirement System) participants, for example, will receive a minimum 1% match and have the option to receive up to 5%. Private-sector companies, on the other hand, can set the match they offer their employees.

Despite these differences, if a federal employee decides to leave an agency and take a job in the private sector, it is possible to roll a TSP into a 401k if desired. Similarly, a 401k can be rolled into a TSP if a person is moving from the private sector to the public sector.

What can I do with my Thrift Savings Plan when I retire?

There are a couple of different options available to federal employees with a Thrift Savings Plan (TSP) who have reached retirement. One option is to leave the funds where they are and let the money grow until it is time for required minimum distributions. Another option is to rollover the TSP into a Traditional or Roth IRA, which can have more flexible investment choices.¹

A One Day In July financial advisor can help you analyze your current investment plan and decide how to proceed as you think about how to best reach your retirement goals.

The decision to rollover a workplace retirement plan into a personal IRA account should be considered on a case-by-case basis, as it may not always be the most prudent choice, depending on the specific facts and circumstances of the case.