Thrift Savings Plan
|This page contains details specific to United States (US) investors, and does not apply to non-US investors.|
The Federal Thrift Savings Plan (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.
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.
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.
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- or 6-to-1 ratio to approximate the total stock market. According to the TSP, "As of December 31, 2019, [...] the Dow Jones U.S. Completion TSM Index made up approximately 16% of the market value of the U.S. stock markets; the S&P 500 accounted for the other 84%. Thus, the combined S Fund and C Fund cover virtually the entire U.S. stock markets."
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:
|G Fund||n/a - see below|
|F Fund||Barclays Capital U.S. Aggregate Bond Index||VBTIX||Barclays U.S. Aggregate Float Adjusted Index||FXNAX||Fidelity® U.S. Bond Index Fund|
|C Fund||S&P 500 Index||VIIIX||S&P 500 Index||FXAIX||Fidelity® 500 Index Fund|
|S Fund||Dow Jones U.S. Completion TSM Index||VIEIX||S&P Completion Index||FSMAX||Fidelity® Extended Market Index Fund|
|I Fund||MSCI EAFE index||N/A||N/A - see below||FSPSX||Fidelity® International Index Fund|
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.
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
TSP funds are operated with low expense ratios, currently at 4.2-6.0 basis points (0.042-0.06% expense ratio).[note 1] 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.
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
|TSP: How to get the Max|
|"In order to get the maximum Agency Matching Contributions, you must not only contribute 5% of your basic pay each period, but you must also contribute all year long. If you reach the IRS annual limit before the end of the year, your contributions (and consequently, your Agency Matching Contributions) will stop."|
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 ($19,500 for 2020 and 2021), 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.
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
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.
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.
|TSP-9||Change in Address for Separated Participant|
|TSP 13-S-C||Spouse's Election of Court Ordered Payment Method|
|TSP 13-S-D||Spouse's Election of Payment Method for Death Benefit|
|TSP 21-R-CL||Residential Loan Checklist|
|TSP-44||Request for Refund of Excess Employee Contributions|
|TSP-75||Aged-Based-In-Service "59 1/2" Withdrawal Requests|
|TSP-76||Financial Hardship In-Service Request|
|TSP-81||Death Benefit Election for a Non-Spouse Beneficiary|
|TSP-82||Fraud Complaint Form|
|TSP-91||Chnage of Address for a Retirement Benefits Court Order Payee|
|TSP-94||Request to Restore an Abandoned Account|
|TSP-95||Changes to Installment Payments|
|TSP-99||Withdrawal Request for Separated & Beneficiary Participants|
- TSP share prices for Quicken, a Python script (programming language) to extract TSP website historical prices.
- Represents an average across all funds. See the TSP Fund Information Sheets for fund-specific expenses. Viewed October 31, 2020.
- Bloomberg: Brokers Lure Soldiers Out of Low-Fee Federal Retirement Plan
- TSP Highlights, July 2012. As of July, not all agencies and services are accepting elections for Roth contributions because they are still making the necessary technical and programmatic changes to their payroll systems.
- Summary of the Thrift Savings Plan pp.11-12.
- Thrift Savings Plan Lifecycle Fund Asset Allocation, Mercer, November 2016.
- "TSP to Change I Fund Index, Leave Others as Is". FEDweek. 2017-12-06. http://www.fedweek.com/fedweek/tsp-change-fund-index-leave-others/. Retrieved 2017-12-08. "The board at its most recent meeting 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."
- Bogleheads® forum topic: . 07 December 2017
- FEDERAL RETIREMENT THRIFT INVESTMENT BOARD (27 December 2018). "MINUTES OF THE MEETING OF THE BOARD MEMBERS". frtib.gov. https://www.frtib.gov/MeetingMinutes/2018/2018Dec.pdf. "Lastly, [TSP CIO] Mr. McCaffrey stated the multi-manager effort, as it is known, includes the I Fund. This means two things: 1) FRTIB will suspend previously announced plans for the re-competition of the I Fund on a single manager basis because that effort will be bundled with the multi-manager initiative. 2) The second issue is that the planned transition of the I Fund benchmark from the MSCI EAFE Index to the MSCI ACWI ex-US IMI Index was intended to be assigned with the new I fund manager contract. That benchmark change will continue to await the assignment of a new primary manager for the I Fund. As a result, the benchmark transition should be concluded within 6 months of the new contract award, meaning the second half of 2020."
- S Fund Information, Federal Retirement Thrift Investment Board, 31 Dec 2019.
- Prime Money Market (VMMXX)
- GoogleFinance price quotes for TSP Funds in Bogleheads.org forum, 20 June 2014
- "ICI - Retirement Plan Fees Vary with Plan Size and Diversified Equity Holdings, Deloitte/ICI Study Finds". ici.org. 2014-08-20. https://www.ici.org/pressroom/news/14_news_deloitte_ici. Retrieved 2017-12-09.
- "401(k) Plan Fees Declined—Slightly—in 2012". SHRM. 28 February 2013. https://www.shrm.org/ResourcesAndTools/hr-topics/benefits/Pages/401k-Feeseclined.aspx. Retrieved 2017-12-09.
- Summary of the Thrift Savings Plan p 16.
- Summary of the Thrift Savings Plan p 4.
- Agency Matching Contributions at TSP.gov
- Summary of the Thrift Savings Plan p.15.
- TSP: Methods for Moving Your Money into Your TSP Account, viewed October 7, 2018.
- TSP main page
- Traditional / Roth Comparison Matrix, from the Thrift Savings Plan
- Christine Benz (26 April 2015). "A TSP Checkup". http://news.morningstar.com/articlenet/article.aspx?id=694560. Retrieved 27 April 2015.