What is a Federal Retirement Thrift Savings Program?

A TSP (Thrift Savings Plan) is a retirement investment plan exclusively available to federal government employees and members of the U.S. uniformed services. This defined-contribution plan provides federal employees many of the benefits private-sector employees enjoy. A Thrift Savings Plan is similar to a 401(k) plan in many ways. However, TSP investment options carry some degree of risk ranging from low to high, meaning a TSP may not be the best option for risk-averse individuals.

How Does a TSP Work?

TSP benefits include agency matching contributions and payroll contributions. You may opt for a traditional TSP and make tax-deferred contributions as a participant. This means you will only get taxed once you start withdrawing after retirement. Conversely, you can opt for a Roth TSP and make after-tax contributions. In this case, your tax will be deducted from your contributions (post-tax contributions), meaning you will owe no taxes when you withdraw the money at retirement. You can transfer your IRA (Individual Retirement Account) and 401(k) funds into your TSP if you’re new in federal employment. You can also move your assets the other way round if you shift from the federal government to a private-sector employer.

Withdrawing from the Thrift Savings Plan (TSP)

Thrift Savings Plan offers three withdrawal options including:

  • Installment payment
  • Single withdrawals
  • Annuity purchases

Investing Options

With TSP, you have the choice of investing in six funds:

  • The Government Securities Investment (G) Fund
  • The Fixed-Income Index Investment (F) Fund
  • The Common-Stock Index Investment (C) Fund
  • The Small-Capitalization Stock Index Investment (S) Fund
  • The International-Stock Index Investment (I) Fund
  • Specific Life-Stock Index Investment (L) Funds

It’s worth noting that all the TSP mentioned above investment options carry some level of risk. This means that if the market conditions turn sour, you could lose your money. The G Fund carries the lowest risk, while the I Fund carries the highest risk. Therefore, consider investing your money in an indexed annuity if you are risk-averse.

Indexed Annuity / Fixed Indexed Annuity

Also known as equity index or fixed index annuity, an indexed annuity is a long-term savings plan whose growth is typically tied to a major market index such as the Nasdaq-100 or S& P 500. An indexed annuity does not invest your money directly in the market index. Instead, it locks your principal annually. This allows your investment to grow when the market index is positive but more importantly, it protects your principal when the market falls.

How Do I Contact TSP Administrators?

Call the toll-free number 877-968-3778. Alternatively, call 404-233-4400, an international phone line that comes with toll charges. You can contact TSP administrators via 877-847-4385, a TDD (Telecommunications Device for the Deaf) line for those with hearing impairment. The general mailing address is Thrift Savings Plan, P.O. Box 385021, Birmingham, AL 35238. You can also contact TSP via the Message Center if you have an online account.

Is TSP Better than an IRA?

First, you can have TSP and IRA – you’re not limited to only one option. The main difference between the two is the varying contribution limits. For instance, in 2021, TSP’s annual limit was $19,500. In contrast, the annual limit for IRAs for individuals with combined multiple IRAs was $6,000 and $7,000 for individuals below age 50 and individuals aged 50 and older, respectively. Therefore, compared to IRA, TSP enables you to accumulate retirement assets much faster.

If you’re a federal employee hoping for a hassle-free and prosperous future, contact us at Premier Protection. Our experts will help you choose the best retirement savings plan based on your needs and risk appetite. Call us at 1-888-486-7415 today!

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