by Carolyn T. Walder
This blog is the first of two that addresses aspects of the Federal Thrift Savings Plan (TSP) for federal employees. Although it is a wonderful retirement plan that allows millions of Federal employees to save for retirement, the TSP has rules and limitations that are important to be aware of when deciding how to tap into this retirement plan when a participant desires (or is required) to withdraw the funds.
There are few retirement plans available that can match the Federal Thrift Savings Plan (TSP) for its extremely low fees and decent lineup of globally diversified index funds. If you are a Federal employee or a member of the military, you have the ability to take advantage of this great retirement plan. During your working career, saving into the TSP and receiving the government match (for Federal Employees Retirement System [FERS] employees) is a “no-brainer,” as you are building retirement savings in a tax-efficient, very low-cost manner. You have the option of saving into the traditional TSP, where you get the upfront reduction in income allowing you to save on your Federal and State income taxes. You also now have the option of saving into a “Roth TSP.” The Roth TSP does not give you a current tax deduction, but it does allow all contributions to grow tax-free, such that your earnings (and contributions) can be withdrawn in the future with no tax consequences.
