How to Set Up a Thrift Savings Plan

Civil service or Armed Forces federal employees are eligible to save for retirement in the Thrift Savings Plan (TSP). Similar to a private-sector 401(k), this tax-deferred account lowers your immediate tax liability and doesn't require any tax payment on the principal or earnings until the money is withdrawn. Many employees are eligible for government matching funds, making the TSP a very solid investment in your present and future.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• Thrift Savings Plan account
• Government-sponsored employment
• Eligibility in the Federal Employees Retirement System or Civil Service Retirement System
• Social Security number

Do It Yourself

1. Do the math and set up how much you can save. You can choose a percentage of your base pay or a dollar amount per pay period to be deferred.

2. Save more by setting up an additional automatic monthly withdrawal from your checking account to reach your maximum contribution limit. You can also make additional payments with work bonuses, unexpected income or financial investment profits.

3. Download and complete the Thrift Savings Plan (TSP) election Form TSP-1 for civilians or TSP-U-1 for uniformed service members from the TSP website (see Resources below).

4. Research the available fund options via Fund Investment Sheets. These should be included in the enrollment package that will be sent to you, or download them from the Form TSP-50 page on the TSP website.

Let the Experts Handle Your Account

5. Visit your human resources or employee benefits office and let a staffer assist you in filling out the TSP election form.

6. Choose to allocate all your assets in Lifecycle (L) Funds. This professionally managed investment mix will equalize risk over a variety of funds for you.

7. See a third-party professional financial planner to determine how much of your salary to save or how best to make specific investment allocations for your particular situation.

Tips & Warnings

• Asset allocation options are flexible. You can set up and manage your own investment portfolio or select a professionally managed package.
• Contribution limits change from year to year, so check the TSP website for the current limit when figuring your contribution percentage or amount.
• If your federal employer has a Web-based benefits management tool, you may be able to enroll in a TSP and manage your account directly through that website.
• You can set up your investment fund choices by phone, website or mail.
• Guidelines for withdrawals contain many restrictions. Your request for preretirement withdrawal of funds can be denied if you don't meet certain criteria.

Resources

• Forms and contribution information at the TSP website