Thrift Savings Plan

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The Federal  (TSP) is a retirement savings plan for civilian and military employees of the United States Government. It is similar to a 401(k) in that it is a defined contribution plan that is managed by the employee, and it has the same contribution limits and very favorable fees.

A Roth 401(k) option commenced on May 7, 2012.

Funds
There are five core funds in the TSP and a family of Lifecycle funds that invest in the core funds. The core funds are:


 * G Fund: a uniquely attractive bond fund that provides yields similar to an intermediate-term Treasury bond fund, but with the stability of principal of a money market fund, and no default risk.
 * F Fund: a fixed income index commingled trust that tracks the Barclays US Aggregate Bond Index.
 * C Fund: a large-to-mid cap stock index commingled trust that tracks the S&P 500 Stock Index.
 * S Fund: a mid-to-small cap stock index commingled trust that tracks the Dow Jones U.S. Completion Total Stock Market Index, commonly known as an Extended market index fund.
 * I Fund: an international stock index commingled trust that tracks the EAFE Stock Index. Note that the I Fund does not have any emerging market or small-cap holdings.

In addition to the core funds the TSP offers Lifecycle (L) funds. Each of the L funds are Target date retirement funds which maintain a mix of the above five core funds that adjusts over time in anticipation of the employee's expected retirement date. The TSP Lifecycle funds employ an active investing approach for setting the funds' glide paths, which is based on efficient frontier analysis using capital market assumptions over a 20-year time horizon and stochastic modeling projections for inflation, economic growth, salary growth, corporate profits, P/E ratios, interest rates, and exchange rates.

Finally, the TSP offers a mutual fund window, which allows investors to invest in almost any mutual fund.

G Fund
The G Fund offers the opportunity to earn rates of interest comparable to those of intermediate-term Government securities but without any risk of loss of principal and very little volatility of earnings. The G Fund is invested in short-term U.S. Treasury securities specially issued to the TSP. Payment of principal and interest is guaranteed by the U.S. Government. Thus, there is no "credit risk". The interest rate resets monthly and is based on the weighted average yield of all outstanding Treasury notes and bonds with 4 or more years to maturity. Earnings consist entirely of interest income on the securities. Interest on G Fund securities has, over time, outpaced inflation and 90-day T-bills.

The G Fund is a uniquely good deal for investors, as it has a risk/return profile unrivaled by any other fixed income instrument:


 * It is risk-free, like Treasury bonds;
 * The yield is equal to the average of intermediate-term Treasury bonds;
 * Like a money market, and unlike Treasuries, its price never goes down;
 * And, because it repurchases its bonds daily, it provides some of the inflation protection of TIPS.

International funds
The I Fund is an international stock index commingled trust that tracks the EAFE Stock Index of large-cap stocks of approximately two dozen developed nations.

On December 6, 2017, the TSP's governing board "at its most recent meeting (November 2017) accepted a recommendation by a consultant to switch to linking the I fund to the MSCI All Country World Index, which covers non-U.S. developed markets, smaller companies and emerging markets." The change in index is expected to roll out in then second half of 2020.

Replicating total stock market
Many TSP investors wish to use the C and S funds to replicate the Total Stock Market. You can hold the C Fund (tracks the S&P 500) and S Fund (tracks the Dow Jones U.S. Completion Total Stock Market (TSM) Index) in a 5-to-1 ratio to approximate the total stock market. According to the TSP, "As of December 31, 2020, [...] the Dow Jones U.S. Completion TSM Index made up approximately 18% of the market value of the U.S. stock markets; the S&P 500 accounted for the other 82%. Thus, the combined S Fund and C Fund cover virtually all U.S. stocks."

Mutual fund window
The mutual fund window allows TSP investors to invest in many non-TSP mutual funds. However, the mutual fund window charges additional fees to cover its costs, which make it much less attractive; TSP investors who want non-TSP funds may prefer to hold them at lower cost in an IRA or HSA. The costs may be reasonable for investors with a very large TSP balance who want to add only a few funds.

Investors may move up to 25% of their TSP to the mutual fund window, with a minimum investment of $10,000. There is a $55 annual administrative fee, $95 annual maintenance fee, and a fee of $28.75 per trade. Thus an investor who holds only one fund in the window, purchasing it once per year, pays an annual fee of $188.75 in addition to the costs of the fund. If the TSP balance is $400,000, this would allow an investment of $100,000, so the extra fee would be equivalent to 0.19% in extra expenses. An investor holding two funds would pay $217.50, equivalent to 0.22% in extra expenses on the same $100,000 investment.

Most similar Funds
Since the TSP funds do not have tickers, people occasionally want to know which funds most closely approximate the TSP, for substitutions in spreadsheets and online fund trackers. Vanguard's Institutional funds track the same indexes as the main four TSP funds and are very similar, although all of them have higher fees than the TSP. Comparable funds from Fidelity are also shown:

There is no good equivalent for tracking the G Fund. Many people just use the Vanguard Prime Money Market(VMMXX) to simulate the lack of volatility, and adjust the balance upwards every few months to match their G Fund balance.

Vanguard no longer has a fund that tracks the MSCI EAFE index. The Blackrock iShares EFA ETF tracks the MSCI EAFE index.

Historical share prices
The TSP Share Price History webpage allows one to download historical fund prices in .csv format that can be imported into spreadsheets. Users may select the funds and time-frame of interest.

Real time tracking
To track TSP fund share prices in real-time in a Google Doc spreadsheet, see TSP GoogleFinance Tips - Google Sheet and.

Fees
TSP funds are operated with low expense ratios, currently at 4.3-5.9 basis points (0.042-0.06% expense ratio). The TSP fund expense ratios are comparable to those of Vanguard and Fidelity. By contrast, all-in expenses for most 401(k) plans are far higher than the TSP, with a 2013 study finding that the median 401(k) participant pays 23 times more than the TSP in all-in expenses, and a 2012 study finding typical 401(k) fees were 30 to 40 times higher than the TSP. For current and former federal government employees who have access to it, the TSP is a spectacularly good deal.

Matching
The federal government matches employee TSP contributions for certain civilian employees, and (after 2017) for members of the military but not employees under the Civil Service Retirement System. For those qualified for matches, the match rates are: 1% automatic match (independent of employee contribution), followed by 1% for each 1% of employee contribution (up to a maximum of 3%), then 0.5% for each 1% of employee contribution (to an additional 1% maximum). Thus, employees may receive up to 1% + 3% + 1% = 5% of their salary in matching contributions.

Gaining the maximum match
Agency matching contributions are made each paycheck. Therefore, to gain the maximum match, an employee must contribute at least 5% throughout the entire year. If the employee reaches the IRS contribution limit for the calendar year, then the employee's contributions will automatically stop and the agency matching contributions will stop too.

Therefore, to gain the maximum match, ensure that:
 * You contribute at least 5% of your salary for each pay period throughout the year.
 * You don't reach the annual IRS contribution limit before the last paycheck.

For employees who want to meet the IRS annual contribution limit for the year ($20,500 for 2022, $22,500 for 2023), you need to be careful that you don't hit the limit too early (and forgo agency matches) or too late (and fall short of the maximum contribution limit). This can be particularly tricky if your salary changes or if you have a variable salary. Some people also like to front-load contributions earlier in the year; if you do this, ensure that you don't front-load so aggressively that you hit the IRS limit before the end of the year, which could cause you to miss out on the maximum agency match, and don't front-load your contributions to the point where you don't have enough to keep contributing 5% of your salary in each pay period. TSP participants may wish to use the TSP's online How Much Can I Contribute? calculator in order to ensure they are contributing the maximum amount; note that in a typical year, there are 26 pay periods, but depending on the calendar year, some years have had a different number of pay periods.

Fund transfers
A TSP participant may redistribute TSP assets across funds at any time (called an "Interfund Transfer" or IFT). IFTs submitted before noon Eastern are effective at close of business that day. IFTs submitted later are effective at close of business the following day. IFTs are limited in number per month to curb costs of frequent trading. Participants can make two unrestricted IFTs per calendar month. After that, only IFTs that transfer funds into the G fund are permitted. If one of the first two IFTs in a month moves funds into the G fund it counts toward the two unrestricted transfers for that month.

Transferring into TSP
The TSP allows current and former employees of the federal government to rollover their 401(k)s and IRAs into the TSP. The TSP does not allow transfers from a Roth IRA.

For example, a federal employee might switch to an employer where she has a 401(k) plan. If she then leaves there, to a third employer, she would normally rollover her 401(k) to an IRA, such as one with Vanguard. Since the TSP offers the lowest cost funds available anywhere, it provides a slightly better value than Vanguard. (The TSP is almost certainly a better value than the second employer's 401(k) plans, which on average have expenses 30 to 40 times worse than the TSP; see fees.) The employee can rollover the assets from her second employer's plan to the TSP. Thus, as long as federal employees never close their TSP accounts by withdrawing their full balance, the TSP remains a valuable benefit to federal service, even after switching jobs.

Transferring out of TSP
Important rules for withdrawing funds from the TSP are that only one cannot easily remove just the Roth TSP portion, leaving the Traditional portion. All withdrawals, including Required Minimum Distributions (RMD's), are taken proportionally from Roth and Traditional account balances.

Qualified charitable distributions
Qualified charitable distributions (QCDs) can not be taken from employer-sponsored retirement plans, such as the TSP. QCDs can only be taken from an IRA.

To avoid a taxable event, transfer funds intended for charity into a qualified IRA.

List of forms
The following table provides a list of all forms used by TSP participants and beneficiaries but not available on the TSP's official website. For the forms available on the TSP's official website, please go to TSP: Forms & Publications. Used together, the forms provided here plus the forms on the TSP's official website are intended as a useful reference for TSP participants and beneficiaries to see what information is required to complete them, prior to the actual form submission.

The forms on this table contain a "Do Not Reproduce" watermark to make it clear that they are copies and not originals that can be printed and used.