What Is a Thrift Savings Plan?

Quick Answer

The thrift savings plan (TSP) is a retirement plan for federal employees and military service members with benefits similar to a 401(k) or IRA. The TSP delivers tax advantages, agency-matching contributions, low fees and more, but its investment options are limited compared to some private-sector plans.

Senior couple calculating savings and researching thhrift savings plan

The federal government provides a different type of workplace retirement account for its employees than private companies, called thrift savings plans, or TSP for short. TSPs are tax-deferred retirement savings and investment plans similar to 401(k)s that are only available to federal employees and military service members.

Whether you're enrolled in a TSP or considering it, it's essential to understand how TSPs work, how to maximize your benefits and alternative savings options for your retirement portfolio.

What Is a Thrift Savings Plan?

A thrift savings plan is a retirement plan that offers federal employees various retirement savings benefits, including automatic payroll contributions, tax savings opportunities and matching agency contributions.

There are two types of thrift savings plans:

  • Traditional TSP: You can deduct your retirement contributions from your gross earnings and save on your annual tax returns. Your retirement savings grow tax-deferred, but you'll pay taxes on your contributions and earnings when you take distributions in retirement.
  • Roth TSP: With this type of TSP, your money is taxed before it's added to your retirement account. You won't get the tax deduction now, but your contributions can grow tax-free, and you won't owe any taxes when you make withdrawals in retirement.

With either plan, the maximum annual contribution is $22,500 for 2023, the same as the limit for private-sector 401(k)s. Federal employees older than 50 can add an additional catch-up contribution of up to $7,500.

As with many 401(k)s, the TSP allows you to maximize your retirement savings with an employer match. Generally, your agency matches your contribution dollar-for-dollar on the first 3% of the pay you save. The government provides a 50% match for the next 2% of your pay, plus another 1% contribution regardless of how much you save.

TSP vs. 401(k) vs. IRA

TSPs are similar to 401(k)s, but may be a better option with higher contribution matches and lower fees. The following comparison table illustrates the similarities and differences between the thrift savings plan, 401(k)s and IRAs:

TSP vs. 401(k) vs. IRA
Thrift Savings Plan 401(k) IRA
Tax savings options Traditional and Roth Traditional and Roth Traditional and Roth
Annual contribution limits $22,500 $22,500 $6,500
Loan from funds Allowed; repaid with interest Allowed with most plans; repaid with interest Not allowed
Retirement distributions options Installment payments, lump-sum payment, convert to an annuity, roll over into an IRA. Depending on the plan, options for lump-sum distribution, periodic distributions, annuity conversion, roll over into an IRA. You can withdraw funds from your IRA any time, but you'll owe income taxes on the distribution plus 10% tax if you're younger than 59½.
Investment choices Five individual funds to choose from Could include plan administrator with a wide range of investment options Can include most traditional types of investments in IRA except life insurance and collectibles.
Employer contributions Potential 5% contribution (1% automatic agency contribution plus up to 4% salary match) Not all companies match contributions. Of those that do, the average employer match is 4.5% of your pay. With SIMPLE IRA, employers must contribute up to 3% of compensation or 2% nonelective contribution up to an annual limit ($330,000 for 2023).
Fees Individual TSP funds have 0.058% expense ratio Varies, but the average expense ratio is 0.88% for large retirement plans and 1.19% for small plans. Varies widely depending on asset

Who Qualifies for TSPs?

The federal government is the largest employer in America, so it comes as no surprise the TSP has a lot of participants, with over 6.4 million participants. Of course, not everyone is eligible to enroll in the thrift savings plan. Most federal government employees qualify to participate in the TSP, but not all. Here's who meets the eligibility criteria:

  • Federal employees covered by the Federal Employees' Retirement System (FERS), typically hired on or after January 1, 1984
  • Federal employees covered by the Civil Service Retirement System (CSRS), hired on or after January 1, 1984, who didn't convert to FERS
  • Members of the uniformed services, which are the Army, Navy, Air Force, Marine Corps, Space Force, Coast Guard, National Oceanic and Atmospheric Administration and Public Health Service
  • Civilians working in eligible sectors of the government

If you work for the federal government, there's a good chance you qualify for a thrift savings plan, but you can always contact your benefits office to verify your eligibility.

Alternatives to TSPs for Retirement Savings

TSPs provide federal employees with an excellent retirement plan option, tax benefits, diversified investment options and low fees. However, if you don't qualify for one, a 401(k) or IRA are solid options for tax-advantaged retirement savings. Here are some other savings options that may deserve a spot in your retirement portfolio:


You can grow your money in stocks, bonds, mutual funds, annuities, exchange-traded funds (ETFs) and more, or enjoy tax benefits by including any of these investments inside a traditional or Roth IRA. Of course, these investments also present risk, so your investment choices should align with your goals and risk tolerance.

Savings Account

There are better options than high-yield savings accounts to grow your retirement money. Even though their returns are substantially higher than a regular savings account, they don't perform well enough for most people to meet their retirement savings goals. But if you're close to retirement, a high-yield savings account may be worth considering if you're looking for a safe place to stash your nest egg during a volatile market.

Health Savings Account (HSA)

Health savings accounts can also be a valuable component of your retirement plan. Your contributions to an HSA are tax-deductible, your account grows tax-free and you can make tax-free withdrawals for qualified medical expenses. These accounts provide another way to maximize the benefits of your retirement portfolio.


Annuities are another option you might consider adding to your retirement plan. Annuities are insurance contracts that offer a source of income during your retirement. You can make one lump-sum payment or a series of payments over time, and your money grows on a tax-deferred basis. Be aware, however, that annuities often come with high fees compared to other retirement vehicles and limited control over investment decisions.

Start Saving for Retirement Early

If you work for the federal government and are eligible for a thrift savings plan, you have the opportunity to grow your retirement savings over time in a tax-advantaged account with diverse investing options and low fees. Start by contributing as early as possible to take advantage of compounding interest over time. If possible, contribute at least enough to maximize the matching employer contributions.

As you plan and save for retirement, remember your credit. Check your credit report regularly, as maintaining good credit can open up options for you during retirement and help you achieve financial milestones.