The Thrift Savings Plan

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I would like to talk about something which is familiar to many employees of the federal government – the Thrift Savings Plan, or TSP for short. Much of this information can be found on the Thrift Savings Plan website, but here I’ll give you some of the highlights. The TSP is a fantastic retirement benefit offered to federal government employees. For government workers it is the equivalent of the 401k account offered in private industry. Like a 401k, money contributed into a TSP retirement account is pre-tax and the amount accumulated is tax-deferred. The idea is that if you work long enough, consistently contribute to your plan, and invest appropriately, you will be able to retire comfortably.

In this video I will talk a little about your employer match and how to maximize it, as well as the availability of a Roth TSP for participants.

Now, before delving further into the TSP, I need to mention FERS. FERS, or the Federal Employment Retirement System, is the retirement benefit available to federal civilian employees who were hired after January 1st 1984. If you are covered under FERS your TSP is one part of a three-legged stool in your retirement years. The other two legs on that stool are your FERS basic annuity and your social security benefits.

If you’re part of the uniformed services, or you were hired as a federal civilian employee before 1984, you’re covered under C. S. R. S. or the Civil Service Retirement System.

Now, listen up – make sure you contribute up to the employer match! Under FERS, your federal agency matches up to 5% when you contribute into your TSP. Let’s break down what you’re getting:

The first 3% of your voluntary contributions are matched dollar for dollar.

The next 2% are matched at 50 cents on the dollar. In practice what this means is that when you contribute 5% of your base pay into the TSP, the agency contributes an additional 4% of base salary into your retirement.

On top of all this, you get an Agency Automatic Contribution of 1% regardless of whether you personally contribute. Make sure you take advantage of this benefit and contribute up to the employer match. It is subject to vesting, but this is free money we’re talking about if you work long enough in the system.

At the end of the day, when you defer 5% of your salary into the TSP the government will kick in another 5%, doubling your contribution power. Leveraging this match is an absolute must, so make sure you take advantage of this excellent benefit.

Next, let’s talk about Roth TSPs. A Roth TSP is a very tax-efficient way to save for retirement. It’s not often best for those are a couple years away from retirement and need the money soon, but rather those who still have time to accumulate and invest for potential growth. The Roth TSP allows you to contribute after-tax dollars into your retirement, accumulate tax deferred, and distribute income when you retire without taxation. What’s great about this option is that you get to keep all of your hard-earned money in retirement without taxation. This can be a significant amount depending on your tax bracket.

The Federal Government offers some great benefits to employees, but navigating what is available to you and making a plan for your retirement in advance is what we do as Certified Financial Planner professionals. Let’s set up a Skype session or meet in person. Go on our website or contact us at We will respond back to you right away. Please subscribe to us on YouTube, and connect with us on Facebook, LinkedIn, and Twitter. Bye for now!

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