Thrift Savings Plan

A thrift savings plan, or TSP, is an ideal way to build up retirement savings if you are, or have been, a government worker. Below is more information on what exactly a TSP is, and how to determine if you qualify.

Many people are not sure what a thrift savings plan is, let alone whether or not it is something they should look into getting. In short, a TSP is a retirement savings program for individuals who are, or have been, employed by the U.S. government, or are veterans of the military. This contribution plan is run and organized by the Federal Retirement Thrift Investment Board.

The easiest way to describe a TSP is to compare it to a standard 401(k) plan, as it works very similarly. How much you will receive from the account will completely depend upon how much you contribute to the account while employed. For some employees, the government will make matching contributions.

Those who are in the armed forces are often authorized to contribute a larger amount to the TSP. This is because those in the military are not usually eligible for the above-mentioned matching contributions, but can receive extra contribution credit through other means of income, such as incentive pay and check bonuses.

Before the year 2006, there was a percentage limit on how much you could contribute out of your basic paycheck into the TSP. However, this was revoked, and now the only restrictions that remain are those enforced by the IRS. While employees can contribute as much of their pay as desired, based on IRS tax code, the contribution matching is often limited to 4 percent of each payday with some restrictions that are specified to each individual employee depending upon the department in which they work.

Consult a fianncial advisor to determine the best plan for you.

As with any retirement account, the TSP has different funding programs available. Below is a brief description of each fund employees can choose from, based upon their position of employment and government affiliation. All are maintained by Barclays Global Investors.

• The Common Stock Index fund, more often referred to as the “C fund”, is invested in Barclays Equity Index Fund.
• The Fixed Income Index Fund, more often referred to as the “F fund”, is invested in Barclays U.S. Debt Index Fund.
• The Government Securities fund, more often referred to as the “G fund”, is a more unique program and is not invested in Barclays. Instead, it is backed by the credit of the government.
• The International Stock Index fund, more often referred to as the “I fund”, is invested in Barclays EAFE Index Fund.
• Lastly, the Small Capitalization Stock Index fund, more often referred to as the “S fund”, is invested in Barclays EAFE Index Fund.

Outside of these different funds, there are also Lifecycle funds (L funds), which are basically trust funds available to tax-exempt employees. These are never considered to be mutual funds, and individual investors are not allowed to be involved with them. For this reason, no reports on these funds are given to the press for financial media coverage.

If you believe you are eligible for a thrift savings plan, then your best bet is to speak to a TSP representative at your workplace. If you do not have one, you can always refer to the TSP website. This will provide you with basic information about all TSP plans, including the Lifecycle funds. You can also locate regular updates and login in for your online account access if you are a serviceman or civilian working for the government. Finally, the site offers online calculators, participant statements and highlights, and fund sheets to keep you updated on everything going on with your specific TSP.

The TSP funds available may be a great option for you if you are currently affiliated with the government in some way. In any economic climate, it’s wise to plan ahead and think about retirement. This program can help you get there.

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