Thrift Savings Plan (TSP) is a defined contribution retirement savings and investment program open to all federal employees, retirees, and members of uniform services of the United States of America. A thrift savings plan offers many benefits to its members and these benefits are the same as the benefits rendered to employees in the private sector.
How Does Thrift Savings Plan Work?
A thrift savings plan is one of the components of FERS (The federal employee’s retirement system). TSP is closely similar to (401)K, which is an investment plan for employees in the private sector, a thrift savings plan is open to all federal workers nearing retirement age, once you are a federal worker, you can register for a thrift savings plan.
Benefits of TSP include an automatic payroll contribution among many others, the maximum limit to a thrift savings plan is $20,500.
Members can also choose to make tax-deferred plans, which means the money transferred to a TSP account will be tax-free until the money is withdrawn.
Eligibility For a Thrift Savings Plan
For you to be eligible for a thrift savings plan, you must be a federal employee or a member of the civil service so members of the following bodies are eligible for a thrift savings plan:-
Federal Employees Retirement System (FERS)Civil Service Retirement System (CSRS)Blended Retirement System (BRS)Legacy Retirement System (LRS)
Federal Employees Retirement System (FERS)
Once you get hired for a federal job, you are automatically registered for a thrift savings plan and 5% of your pay is deducted too but you can decide not to register for the plan.
Civil Service Retirement System (CSRS)
Once you get hired into civil service you can register for a thrift savings plan by yourself whenever you want to, they don’t automatically register you and they don’t deduct from your pay.
Blended Retirement System (BRS)
If you are a service member, you get automatically registered for a thrift savings plan with 5% of your pay, you can also decide not to register for the plan.
Legacy Retirement System (LRS)
If you’re in the military and you are under the legacy retirement system, you are eligible for a thrift savings plan, but you need to register by yourself at your convenience, you won’t be automatically registered.
Thrift Savings Plan Investment Options
Thrift Savings Plan offers six options for its members to invest in. These options are:-
Government Securities Investment is also known as the “G Funds”. The International Stock Index Investment is also known as the “I Funds”. The Common Stock Index Investment is also known as the “C Funds”. The Small Capitalization Stock Index Investment is also known as the “S Funds”. The Fixed Income Index Investment is also known as the “F Funds”. The Special Life Cycle Funds are also known as the “L Funds”.
The above are the different investment options you can pick from, be sure to know all risks involved with all options before deciding on the one to go with, you’ll be given the risks of the option you choose and be asked to sign an acknowledgment letter of the risks during your registration.
Thrift Savings Plan Withdrawal
There are two types of withdrawal plans which are:-
Withdrawal for age 59 and halfFinancial hardship withdrawal
Withdrawal for age 59 and half
This withdrawal is for those above 59 and a half years that are still actively in service, the minimum withdrawal is $1,000 for your entire balance and you can withdraw only 4 times a year.
Financial hardship withdrawal
This withdrawal is for those with any financial hardship such as medical expenses, losses due to natural disasters, e.t.c. You can only withdraw a minimum of $1,000.
Thrift Savings Plan (TSP) is a great way to save and invest before retirement, and if you’re already retired, you can still register for the plan, but you must be a federal employee, member of the civil service, or military. You should consider registering for a Thrift Savings Plan if you’re looking for ways to save and invest money because you can get the same benefits as the private sector employees.
Is there an age limit for opening a thrift savings plan?
Answer:- There’s no age limit for opening a thrift plan, just be a federal employee, military, and civil service and you can register for a plan.
Can I withdraw my money anytime from a thrift savings plan?
Answer:- Yes, you can withdraw your money any time you want to.
How long does it take to withdraw from my Thrift Savings Plan?
Answer:- It takes up to 8 weeks to successfully withdraw after your withdrawal form has been received.
