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The Thrift Savings Plan


The Thrift Savings Plan is a government-sponsored program providing retirement income for military service members and federal civilian employees. Although contributing to the TSP is optional, many service members take advantage of it, because, depending on whether the traditional TSP or the TSP ROTH option are selected, their contributions are either tax deferred or are tax free if withdrawn under specific circumstances. Also, your contributions and earnings in the TSP are yours to keep, whether you leave the military or stay in until retirement.

Contributing to the Thrift Savings Plan

When you enroll in the TSP, you allocate a percentage of your pay to be contributed through payroll deductions. You can select from two different tax options: traditional or ROTH TSPs. With a traditional TSP, your contributions are pre-tax, meaning you do not pay taxes on them - or any earnings - until you withdraw them, usually after age 59 ½. With a ROTH TSP, your contributions are made after you have paid tax on the money, but the earnings are tax free. As with the traditional TSP, the minimum age for penalty-free withdrawals is at age 59 ½, if you satisfy the IRS requirements.

  • Enrollment. The easiest way to enroll in the TSP is through MyPay. You may also enroll through your installation's finance office. Once enrolled, be sure to compare your TSP statement with your Leave and Earnings Statement to ensure the contribution amounts are correct.
  • Tax-deferred contributions. Your traditional contributions to the TSP are taken before federal taxes (and in most cases, state taxes) are calculated. Therefore, you won't pay taxes on your contributions until you withdraw them.
  • Tax-exempt earnings. Your ROTH contributions are taken out of your paycheck after your income is taxed (unless you are serving in a designated combat zone and your pay is tax-exempt). Contributions and earnings from ROTH accounts are tax free. As with the traditional, the minimum withdrawal age is 59 ½.
  • Contribution amounts. You can choose to contribute a percentage of your basic pay, incentive pay or bonuses to the TSP. However, you must elect a portion of your basic pay in order to elect to contribute any amount from your incentive, special or bonus pay. The Internal Revenue Service places limits on your TSP contributions, which change each year. For current IRS limits, visit the TSP website.
  • Making investment changes. Once your account has been established with your first contribution, the TSP will mail your account number, password and personal identification number separately. Your account number and password provides access to your account on the TSP website, where you can choose your investment options or make changes to your account. You can use your PIN and account number to access your account using the TSP ThriftLine (877-968-3778), as well.

A complete explanation of the TSP program is available in the publication Summary of the Thrift Savings Plan. You may also want to listen to a podcast about the Thrift Savings Program and the Savings Deposit Program, two programs designed to make saving money easy for military service members. As with any decision about your lifetime spending plan, be sure to thoroughly research your options before you invest your money.

Investing your contributions

Your contributions will, by law, be invested in the Government Securities Investment Fund. Once you have a pin number, you can change where your contributions are invested by choosing your investment funds. You may choose just one fund or a combination of funds. Your options include:

  • Individual funds.
    • Government Securities Investment Fund
    • Fixed Income Index Investment Fund
    • Common Stock Index Investment Fund
    • Small Capitalization Stock Index Fund
    • International Stock Index Investment Fund
  • Lifecycle Funds. The TSP also offers five "lifecycle" or L Funds. Each fund has a different, professionally designed mix of the five individual funds. You select your L Fund based on when you plan to withdraw the money.

Loans and withdrawals

Because the TSP is a retirement savings plan, loans or withdrawals before separation or retirement are restricted.

  • Loans. Loans are available to members who are still in pay status. With a $50 processing fee, you can borrow from your contributions and earnings. You pay back the loan, with interest, through payroll deductions.
  • In-service withdrawals. Hardship withdrawals are available to members under certain, limited conditions. Also, members age 59 ½ or older (who are still in pay status) may make a one-time, age-based in-service withdrawal.

Post-separation withdrawals

After you separate from the military, you have several withdrawal options.

  • Partial withdrawal. You may make a one-time request to withdraw part of your account, leaving the balance to continue to accrue earnings for later withdrawals.
  • Lump sum payment. You may receive a single payment of your entire TSP account, or you can request a portion of your balance paid as single payment and a designation of the remaining options on the rest of your balance.
  • Monthly payments. You specify a dollar amount to be sent each month, or the TSP will calculate your monthly payments based on your life expectancy. Again, you can request that a percentage of your balance be held in the TSP to make monthly payments (which continue to grow based on your investments) with the rest designated to the other options. Payment amounts can be changed once a year.
  • Life annuity purchase. You can choose all or a portion of your account to go to an annuity, which is paid to you (or your survivor) every month for life.

When you withdraw your money from TSP, you will owe taxes on any traditional contributions (except the portion of the balance made from tax-exempt pay) and the earnings they have accrued. You can continue to defer these taxes by transferring or rolling over your TSP withdrawal payment to a traditional individual retirement account or an eligible employer plan. You can also transfer or roll over your traditional funds to a ROTH IRA, but you will have to pay taxes on the full amount in the year of the transfer. If you have ROTH contributions in your account, you have already paid taxes on them. You will not owe any further taxes on your ROTH contributions, and you will not owe taxes on their earnings if your withdrawal payment meets IRA requirements. Requirements state that five years must have passed since January 1 of the calendar year when you made your first ROTH TSP contribution and you have reached age 59 ½ or have a permanent disability. For more specific information on withdrawals, visit the TSP website.


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