How the TSP works
The Federal Retirement Thrift Investment Board runs the TSP as a defined contribution plan with the same tax rules as a 401(k): contributions come out of basic pay each pay period, as traditional (pre-tax) money, Roth (after-tax) money, or a mix. Service members can also contribute from incentive, special or bonus pay, and contributions from tax-exempt combat-zone pay stay tax-exempt.
New employees are enrolled automatically at 5% of basic pay unless they choose otherwise, and money with no investment election goes into an age-appropriate L Fund.
For 2026 you can defer up to $24,500, a personal limit shared with any 401(k) or 403(b) you contribute to at another job. From the year you turn 50, contributions beyond it spill over automatically as catch-up contributions, up to $8,000, or $11,250 in the years you turn 60 to 63. New for 2026: if your 2025 wages from TSP-eligible federal work topped $150,000, those catch-ups must be Roth.
Agency contributions: the 1% and the match
FERS employees and members of the Blended Retirement System (BRS) receive two kinds of agency or service money. The automatic 1% contribution arrives every pay period whether or not you contribute anything. Matching contributions follow your own: dollar for dollar on the first 3% of pay you put in, then 50 cents per dollar on the next 2%. Contribute 5% and the government adds another 5%, for 10% of pay in total; anything above 5% is not matched. Employees under the older Civil Service Retirement System (CSRS), and uniformed members outside BRS, get no agency contributions.
- Vesting: matching money is yours at once; the automatic 1% vests after 3 years of civilian service, 2 years in certain political and noncareer senior posts, and 2 years for service members.
- BRS timing: the 1% starts after 60 days of service, and matching starts after 2 years for members who began on or after January 1, 2018.
- Pacing: the match is figured each pay period, so hitting your annual limit before the year’s last paycheck means no match in the pay periods that remain.
The TSP funds and what they cost
The menu is deliberately short. Five individual funds cover the main asset classes. The G Fund holds Treasury securities issued only to the TSP, with principal and interest guaranteed by the government, so its value never falls; only its interest rate changes. The other four are index funds: the F Fund tracks the US investment-grade bond market, the C Fund the S&P 500, the S Fund the small and mid-sized US companies outside the S&P 500, and the I Fund stocks from more than 40 other developed and emerging countries. The C, S and I Funds cover different slices of the stock market without overlapping.
The L Funds are target-date funds built from those five. Each is rebalanced daily and grows more conservative every quarter until its target year, when it merges into L Income.
Cost is the TSP’s standout feature. Total expense ratios for 2025 ran from 0.034% to 0.051%, or 34 to 51 cents a year per $1,000 invested, and forfeited, unvested 1% contributions help pay the administrative bill. A mutual fund window gives access to outside funds, with extra fees of its own.
Getting money out of the TSP
While you still work for the government, you can take a TSP loan, a financial hardship withdrawal, or an in-service withdrawal once you reach 59½. After you separate, you can combine partial withdrawals, installments paid monthly, quarterly or yearly, a life annuity bought through the TSP’s vendor, or a full withdrawal. You can also leave the money invested until required minimum distributions begin, and even roll traditional IRAs and other workplace plans into it.
Traditional money is taxed as ordinary income when it comes out, and before 59½ it generally owes a 10% additional tax too. The rule of 55 removes that tax if you separate in or after the year you turn 55, and federal law enforcement officers, firefighters, corrections officers, customs and border protection officers and air traffic controllers qualify from age 50.
Since late January 2026, you can also convert traditional TSP money to Roth inside the plan. Each Roth in-plan conversion must be at least $500, is taxed as income that year, must be paid for with money from outside the TSP, and cannot be reversed. It follows the same logic as any Roth conversion: pay tax now to make future growth tax-free.
How the TSP fits a FERS retirement
For most federal civilians the TSP is one of three retirement income sources. The FERS basic annuity is a pension figured from your years of service and your highest three-year average basic pay, Social Security pays a benefit based on your covered earnings, and the TSP holds whatever you and your agency saved. The annuity and Social Security follow fixed formulas; the TSP is the part whose size depends on your own choices.
That mix shapes how the TSP might be invested and drawn down. A retiree whose annuity and Social Security cover most spending can treat the TSP as a reserve, or use it to bridge the years before claiming Social Security. One who relies on the TSP for much of their income needs a sustainable withdrawal rate and some protection from a bad early market. Because traditional TSP withdrawals stack on top of a taxable annuity, Roth contributions and conversions in lower-income years can help manage the tax bill later.
Illustrative numbers
A FERS employee with $85,000 of basic pay contributing 5%
- Pay
- Basic pay for the pay period
- Your first 3%
- Your contributions up to 3% of basic pay, matched dollar for dollar
- Your next 2%
- Your contributions from 3% to 5% of basic pay, matched 50 cents per dollar
Applies to FERS employees and eligible BRS members; the 1% is paid even if you contribute nothing.
Your contribution, 5% of pay$4,250
Agency automatic 1%$850
Match on your first 3%, dollar for dollar$2,550
Match on your next 2%, 50 cents per dollar$850
Total into the TSP for the year$8,500, or 10% of pay
Contributing 5% turns into 10% of pay. Dropping to 3% would cut the agency’s share from $4,250 to $3,400 and total saving to $5,950, so the last 2% of your own pay brings in another $850 of match.
At a glance
TSP funds at a glance, with 2025 total expense ratios
| Fund | What it holds | 2025 expense ratio |
|---|---|---|
| G Fund | Special-issue US Treasury securities; principal and interest guaranteed | 0.034% |
| F Fund | Tracks the Bloomberg U.S. Aggregate Bond Index | 0.035% |
| C Fund | Tracks the S&P 500 Index | 0.035% |
| S Fund | Tracks the Dow Jones U.S. Completion Total Stock Market Index | 0.051% |
| I Fund | Tracks the MSCI ACWI IMI ex USA ex China ex Hong Kong Index | 0.048% |
| L Funds | Target-date mixes of the five funds, from L Income to L 2075 | 0.035%–0.041% |
Put it in your plan
TSP in MoneyWhatIf
Enter a TSP as a 401(k); the tax rules are the same. Contributions are fitted to the 2026 rule snapshot, $24,500 of deferrals plus age-based catch-ups, and the elective-deferral pool is shared per person. Agency money goes in as the employer match, which pays the smallest of its rate, its ceiling as a share of pay and the remaining total-additions room, so a 100% match capped at 5% of pay reproduces the full agency amount at a 5% contribution. For the FERS annuity, turn on Work out the pension on the job and enter the benefit percentage, service years and final-average salary.
Common questions
TSP FAQs
Is the TSP the same as a 401(k)?
For tax purposes it works like one: the same $24,500 deferral limit for 2026, the same catch-ups, traditional and Roth options, and the same withdrawal and RMD rules. The differences are practical. The TSP is created by federal law rather than an employer’s plan document, its menu is a short list of low-cost funds, its costs are unusually low, and agency contributions follow one fixed formula for everyone under FERS.
What happens to my TSP if I leave federal service?
The account stays yours and stays invested. You can generally leave it in the TSP, roll it to an IRA or a new employer’s plan, or start withdrawals. If you leave before meeting the vesting requirement, usually 3 years of civilian service, you forfeit the automatic 1% contributions and their earnings, but never your own contributions or the matching money.
Can I contribute to an IRA as well as the TSP?
Yes. IRA limits are separate: $7,500 for 2026, or $8,600 from age 50. Because the TSP counts as a workplace plan, a deductible traditional IRA contribution phases out between $81,000 and $91,000 of modified AGI for a single filer, while a Roth IRA has its own income limits. You can also roll pre-tax IRA money into the TSP, which can clear the way for a backdoor Roth IRA.
Which TSP fund should I choose?
That depends on when you will need the money and how much volatility you can live with, and no single answer fits everyone. The G Fund cannot lose value but gives up the higher long-term growth that stocks may offer. The C, S and I Funds hold stocks and can fall sharply in bad years, and the F Fund holds bonds. An L Fund sets and adjusts the mix for a target year if you prefer not to manage it.