Thrift Savings Plan
The Thrift Savings Plan (TSP) is a retirement savings and investment plan for federal employees and members of the uniformed services in the United States. It is designed to help participants save for retirement by allowing them to contribute a portion of their pay to the plan, which can be invested in various funds. The TSP offers tax advantages, as contributions can be made on a pre-tax or Roth (after-tax) basis, and earnings grow tax-deferred until withdrawal.
Examples of contributions include:
- Employee contributions: Federal employees can contribute up to a specified percentage of their salary.
- Agency contributions: Many federal agencies provide matching contributions, which can significantly boost retirement savings.
Cases illustrating TSP usage:
- A federal employee contributes 5% of their salary to the TSP, and their agency matches 4%, providing a total contribution of 9% of their salary towards retirement.
- A service member utilizes the TSP to save for retirement while also benefiting from the military’s automatic contribution of 1% of their basic pay, regardless of their own contributions.