TSP: An In-Depth Look At The Federal Retirement Plan For Certain Federal and Civilian Employees | Daryl Shankland

DARYL SHANKLAND – Most people have some type of retirement plan, but most of the talk centers on the topic of 401(k) retirement plan. Yes, 401(k)s are great retirement vehicles, they are not the only ones. And, it’s only possible to have through an employer or a private entity.  And, it’s not offered to military or government employees. For them, the Federal Employees’ Retirement System (FERS) allows them to fund a plan called the TSP (Thrift Savings Plan).

A Look At Thrift Savings Plan

The TSP, an investment and retirement savings account for military members and federal employees, offers a plethora of benefits:

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  • Low administrative costs and customization ($20 yearly fee for $100,000 portfolio)
  • An array of investments you can mix and match (should you want to manage the account yourself)
  • Matching funds from your employer
  • Easy movement of assets between retirement accounts and TSP
  • Decide how to contribute money – pre-tax of a traditional TSP or post-tax of a Roth TSP


Independent government agency Federal Retirement Thrift Investment Board sets up policies for investments and controls the TSP by looking at the investment performance. Every FRTIB member is a fiduciary, managing the investment so that its participants and beneficiaries’ interests are protected.

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How Does The TSP Work?


TSPs work like other contribution plans – 401(k) and 403(b) plans – but it’s a federal government controlled program that you’re automatically enrolled in if you’re eligible.  For any FERS employee hired after July 31, 2010, the TSP deducts three percent of the basic pay every pay period. Contributions can be changed or stopped whenever you want.


TSPs get an automatic one percent contribution from their agency every pay period, even without a contribution from you. These contributions do not come from your check. The majority of FERS participants will invest in the automatic contributions after three years of service; although certain positions do so after two years.


TSP participants can benefit from the employer matching programs, where the employer matches the employee’s contributions up to a certain percentage. For a person to get the most, they need to contribute up to five percent to the TSP. The first three percent are matched dollar-for-dollar with the remaining two percent is matched 50 cents for every dollar.


These maximum contributions limits are similar to the 401(k) and 403(b) plans.


For 2018, up to $18,500 of your salary can go into the plan; in 2017, the amount was just $18,000. If you’re over the age of 50, you can put another $6,000 in the catch-up contributions. These limits often change with the inflation ration. The cap is only applied to payroll deductions, not the matches employers make.

A Look At The Different TSP Funds

There are six types of funds that employees can pick from, each with their own positive and negative aspects. When choosing funds for yourself, be sure to consider what the risk tolerance is, your knowledge of the investment and the goals you have for the future.


G Fund –This is the Government Securities Investment Fund with investments in government securities. These funds are deemed low-risk and offer a low return rate.


F Fund –This is the Fixed Income Index Investment Fund, which puts money into foreign government, corporate, mortgage-backed and U.S. government bonds. When it comes to investing, the fund sticks with the indexing method. The bond market bears little influence on how it’s managed. The F Fund also offers low return rates and comes with minimal risk.


C Fund –This is called the Common Stock Index Investment Fund where money is put into the stock market, and the return rate is influenced by the market’s performance. There is more risk with this method, but more money could be earned from it too.


S Fund –The Small Cap Stock Index Investment Fund will put money on the stock market but only for small-to-medium sized companies not on the S&P 500. The risk is even more than the C Fund, but it could also lead to a higher return rate than the C Fund provides.


I Fund –The International Stock Index Investment Funds puts money in the international stock markets, which has the most risk but the most potential for significant growth.


L Fund –The Lifecycle Funds is an investment of savings in various series using any of the funds stipulated on the target retirement dates such L2020, L2030 and L2050, which means a person who is retiring in 2020 will have a retirement date of L2020. These funds are rebalanced each quarter to align the risk for the target date. Retirees taking money from the TSP can access their L Income Fund, which focuses on maintaining assets and rebalancing funds to ensure a proper mix.


Who Is Eligible For A TSP Account?

A TSP is not available to everybody, and not everyone who is eligible for one should open one. Those eligible for a TSP account include part-time or full-time federal employees or military members:


  • FERS employees hired after Jan. 1, 1984
  • CSRS (Civil Service Retirement Service) hired before Jan 1, 1984that chose not to convert to the FERS.
  • Civilians of certain government services
  • Active or Ready Reserve military members


Employees are encouraged to talk with their human resource office to determine their eligibility.

Withdrawing From The TSP Account

Once you reach the age of 70 1/2, you must start taking deductions from the account, or you need to begin withdrawing a year after you leave the employment. You can also make a partial or full withdrawal.


For partial ones, a one-time withdrawal can be made with the rest staying the TSP until later.  This can only be done if you’ve never made a partial withdrawal before and you don’t already have one pending.  The amount for partial withdrawal must be no more than $1,000.


A full withdrawal can be made either all at one time or through a monthly payment annuity. These payments can be set to a specific payment amount until the TSP no longer has money in it.  The payments can be fixed to the IRS life expectancy tables, which calculates payments based on your age and the TSP’s account balance.


If a withdrawal must be made before you turn 55, you could be subjected to a 10 percent penalty. If leaving the military or federal employer, the money can remain in the TSP so long as the amount is more than $200. The savings continue to grow and be subjected to low admin costs, but there is no reason to contribute more money to it. It is possible to transfer the TSP money into a traditional IRA and employer-sponsored plans if you choose to do so.

TSP and FERS are important parts of your retirement

What To Keep In Mind

If you have a TSP account, you already know how beneficial it can be for your retirement. They work like the 401(k) plans but offer more in the way of employer matches and high return rates. Be sure to talk with the benefits office to ensure you get the most from your TSP account.  You should also talk with a financial advisor to get the most from the earnings.

2 Important Tips To Save Money For Your Golden Years

  • Retirement saving is a key part of ensuring financial health. It’s great to have a savings fund for rainy days, but when you’re not working in your later years, you need a retirement fund. A 401(k) or TSP account can help you fund for those years. Be sure to contribute as much as possible and use the employer matching programs whenever possible.


  • You may feel overwhelmed to invest as much as you can, but don’t know how. This is why you need the help of a financial advisor. They can help you increase your savings for retirement while also ensuring the “now” of your financial life is in good shape too. Be sure to talk with a financial advisor who specializes in the area you need.



Daryl Shankland has been guiding clients in their investment decisions since 1980, encompassing both good times and bad. Her broadcasting background has helped her communicate complex, quickly changing information to clients in a manner that they can understand. Over the years, Daryl has been a frequent commentator on financial matters on both television and radio.


  • You may feel overwhelmed to invest as much as you can, but don’t know how. This is why you need the help of a financial advisor. They can help you increase your savings for retirement while also ensuring the “now” of your financial life is in good shape too. Be sure to talk with a financial advisor who specializes in the area you need.

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