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Question: What is the Thrift Savings Plan (TSP)?

Answer: A retirement and investment plan established by Congress in the Federal Employees’ Retirement System Act of 1986 to provide eligible Federal employees savings and tax benefits similar to those offered by many private corporations in 401(k) plans.  It is a defined contribution plan administered by the Federal Retirement Thrift Investment Board.  

Question: Why should I participate?

Answer: It provides the potential for more income in retirement; current tax reduction; and tax-deferred growth.  If you are covered by the Federal Employees' Retirement System (FERS), you should participate because it is one-third of your retirement benefits; in addition to the FERS basic annuity and Social Security.  While the FERS basic annuity and Social Security may have cost-of-living adjustment provisions, the TSP presents the only portion of your retirement package with the potential to outpace or grow at a rate that is greater than the inflation rate.

For federal government employees covered by the Civil Service Retirement System (CSRS), the TSP is more supplemental in nature.

For FERS and CSRS participants, it provides the potential to have greater retirement income than you would if your relied only on the FERS or CSRS basic annuity and Social Security (FERS only).

Question: How much should you contribute?

Answer: Short answer - as much as you can afford.  The more you contribute while you are working should translate to more you will have available for retirement.  There probably isn't a retiree who 'regrets saving too much for retirement.  To get a more definitive answer, work with an advisor to prepare a Retirement Plan.  Learn More 

Question: What is the difference between regular TSP and the Roth TSP?

Answer: The TSP offers pre-tax (regular) as well as after-tax (Roth) contributions. Pre-tax (regular) contributions allow you to reduce your current tax liability because the deduction to fund your TSP contribution is made before taxes are withheld, resulting in a smaller amount of income subject to income taxes.  You pay the taxes on the regular TSP when you start withdrawing your money from the account, presumably in retirement.

Roth contributions to the TSP are made on an after-tax basis.  There is no reduction in your current tax liability for Roth TSP contributions.  The benefit of the Roth TSP is the fact that when you start making withdrawals from the Roth TSP in retirement, those withdrawals are usually TAX-FREE.   

Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

Question:  Which is better, the regular TSP or Roth TSP?

Answer: Short answer - it depends on your individual situation.  While the prospect of reducing your current income is attractive, just about every income source you will have in retirement could be taxed.  The Roth TSP can act as a tax hedge; with the proposition that taxes can be greater when you retire than they are now, the Roth TSP should warrant some consideration as being part of your retirement planning strategy.

Question:  Which fund is the best for me?

Answer: It depends on your individual situation (such as: age, risk tolerance, time horizon and other investments). Contact us to develop an Investor and Risk Profile.   

Question: What are my investment choices in the TSP?


G Fund (Government Securities Investment Fund) - comprised of U.S. Treasury (government) securities where the earnings are based upon the interest rate paid on the government bonds in which the fund invest.  

The G Fund is subject to inflation risk, or the possibility that your G Fund investment will not grow enough to offset the reduction in purchasing power that results from inflation.

The fund itself is not guaranteed and fund's performance will vary.

F Fund (Fixed Income Index Investment Fund) - comprised of U.S. government, mortgage-backed, and corporate bonds and seeks to track the performance of the Barclay's Capital U.S. Aggregate Bond Index.

Because the F Fund returns move up and down with the returns in the bond market, your F Fund investment is subject to market risk. For example, when interest rates rise, bond prices (and thus, the returns of the index and the F Fund) fall. Conversely, in an environment of falling interest rates, bond prices, as well as the index and F Fund returns, rise.

As an F Fund investor, you are also exposed to credit (default) risk, or the possibility that principal and interest payments on the bonds that comprise the index will not be paid.

The F Fund is subject to inflation risk, meaning your F Fund investment may not grow enough to offset the reduction in purchasing power that results from inflation.

Your F Fund investment is also exposed to prepayment risk, which is the probability that if interest rates fall, bonds that are represented in the index will be paid back early thus forcing lenders to reinvest at lower rates.

The Barclays U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.

C Fund (Common Stock Index Investment Fund) - comprised of the common stocks of the 500 largest U.S. companies and managed to track the performance of the S&P 500 Index.

Your investment in the C Fund is subject to market risk because the prices of the stocks in the S&P 500 Index rise and fall.

By investing in the C Fund, you are also exposed to inflation risk, meaning your C Fund investment may not grow enough to offset inflation.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

S Fund (Small Cap Stock Index Fund) - comprised of common stocks of more than 3,100 U.S.-based corporations with the exclusion of the 500 largest companies represented in the S&P 500.

The prices of small cap stocks are generally more volatile than large cap stocks

I Fund (International Stock Index Investment Fund) - comprised of the stocks of companies that make up the Morgan Stanley Capital International EAFE Index.  Companies generally are headquartered in Europe, Australia, Asia, or the Far East).

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

By investing in the I Fund, you are also exposed to inflation risk, meaning your I Fund investment may not grow enough to offset the reduction in purchasing power that results from inflation.

The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. The MSCI EAFE Index consists of the following developed country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the UK.

L Fund (Lifecycle Funds) - invests in various mixes or combinations of the G, F, C, S, and I Funds available in the TSP. Designed to take into consideration the participant's projected retirement date, assuming that the more years a person has until retirement, there is a greater need for growth of assets, and therefore would have a greater amount invested in the C Fund, S Fund, or I Fund, versus a participant who has fewer years left and typically more conservative, less concerned about growth, and more interested in preservation of capital and interest paid on bonds in the G Fund and F Fund.

When investing in L funds you are subject to the investment risks associated with the G, F, C, S, and I funds.

Your account is not guaranteed against loss. The L Funds can have periods of gain and loss, just as the individual TSP funds do.

No investment strategy assures a profit or protects against a loss. Investing involves risks, including possible loss of principal.

All indices are unmanaged and may not be invested into directly.

Question:  What are my options if I want to withdraw money from my TSP account without penalty?

Answer:  A participant in the TSP can withdraw funds under several circumstances:

  1. A one-time opportunity (without penalty), at age 59 ½ or older as you continue to work and contribute, called an “in service age based withdrawal”.
  2. In the year an employee turns 55 (or thereafter), retires, or separates, they can withdraw or transfer their TSP penalty free.

Question:  Are there any advantages to rolling over some or all of my TSP account to an IRA, when I am eligible without penalty?

Answer:  An IRA provides flexibility.

  1. More investment choices
  2. More control of distributions
  3. Greater control over how your heirs will receive your assets

Learn More

Question:  How does the cost of my federal group life insurance compare to private term life insurance?

Answer:  In many cases it may be more cost effective for you to own a private life insurance policy.  Also, your own policy will stay with you in the event you leave your federal position.  We can run a cost comparison to help you determine which policy could be more cost effective for you.  Learn More 

Question:  How much life insurance do I need?

Answer:  We can provide a “needs” analysis to help you determine how much, if any, life insurance you need for your personal situation.  Learn More 

Question:  Why do I need a Retirement Plan?

Answer:  The most basic reason is to determine if you will run out of money during your retirement.  We look carefully at the expenses and goals you expect to have in retirement and the sources of income and assets that can be used in your retirement.  We develop a customized plan for your situation, with scenarios structured for meeting your expenses and goals.  Learn More 

Question:  Are there different strategies for selecting spousal benefits when I get ready to retire?

Answer:  Yes, depending on your personal situation.  If you want to provide Federal Employee Health Benefits (FEHB) to your surviving spouse; your surviving spouse must be the recipient of an annuity in some amount to continue the FEHB.  To provide a survivor annuity benefit, you must give up a portion of your basic annuity.  For CSRS and CSRS offset a little less than 10% of your basic annuity is given up to provide a 55% benefit for your spouse.  In the case of FERS, a full 10% of your basic benefit is given up to provide a 50% benefit for your spouse.  This is a yearly cost to a federal employee.  Permanent life insurance may be a cost effect way to provide this benefit and keep your full basic annuity benefit. 

Contact us to learn more.