How Do I Get the Most Out of My TSP Account?

Early contribution is the most effective way to increase your TSP earnings.

The Thrift Savings Plan is a retirement savings plan specifically geared toward federal government employees. Federal employees usually open TSP accounts upon entering federal service and cannot withdraw funds until leaving federal service. As is the case in any retirement plan, the longer you maintain and contribute to the fund, the more interest and, in some cases, employer contributions will accrue. With TSP, however, you can accrue an automatic one percent employer contribution per pay period. Federal employer contributions increase, but vary, along with employee contributions to individual TSP accounts. You can also save on administrative fees and taxes by consolidating traditional Individual Retirement Accounts and 401-K plans into your TSP account.

Instructions

1. Complete the necessary paperwork to start a TSP account, if you are a federal employee and have not already done so. Once you open your TSP account, set up your online TSP access account immediately once you receive a password or PIN in the mail. If you have an existing TSP account, check the status periodically and inquire with your payroll department about possible changes to your account.

2. Arrange with your payroll department to contribute a certain amount from your paychecks to your TSP account. Fill out a TSP-1 form for regular employee contributions. Although you are automatically entitled to receive a one percent employer contribution each pay period, the government will also increase contributions up to five percent of employee contributions.

3. Consolidate any existing IRA or 401-K accounts into your TSP account. Doing so will save on administrative fees and taxes. Taxes on TSP funds usually do not accrue until the time of withdrawal.

4. Check your statements online or by mail to keep track of your vested, or employer contributed, earnings. Employer contributions are not deducted from your paycheck, and do not increase your taxable income. Also, employee contributions are deducted from your paycheck before taxes, thus reducing your taxable income.

5. Withdraw your TSP funds after you leave federal service. Indicate on your TSP-70 withdrawal form whether you want a full single withdrawal or monthly payments.

Tips & Warnings

• Employees 50 years of age or older may elect to have "catch up" contributions withdrawn from their paycheck by filling out a TSP-1-C form in addition to regular employee contributions to exponentially increase retirement savings.

• There are two types of TSP plans: the Federal Employee Retirement System (FERS) and the Civil Service Retirement System (CSRS). While FERS covers employee contributions, FERS annuities and Social Security options, CSRS TSP funds supplement CSRS annuities.

• You need to withdraw your TSP amount by the appropriate deadline, or you will forfeit your funds to TSP. The withdrawal deadline applies on April 1st on the year you turn 70 and a half after leaving federal service.

• If your TSP account balance exceeds $3,500 and you are married, you will need to indicate your spouse as a beneficiary at the time of withdrawal.

References

• Thrift Savings Plan: Form TSP-70, Request For Full Withdrawal
• Thrift Savings Plan: Withdrawals After Leaving Federal Service
• USAid.gov: Summary of the Thrift Savings Plan