TSP Guide 2026
Everything federal employees need to know about the Thrift Savings Plan: 2026 contribution limits, fund options, agency matching, and retirement withdrawal strategies.
Project Your TSP Growth & Retirement Income
Model contributions, growth, and withdrawal strategies.
What is TSP?
The Thrift Savings Plan (TSP) is the federal government's 401(k)-equivalent retirement savings plan. It's one of the three legs of FERS retirement (along with your pension and Social Security).
TSP has the lowest fees in the industry at just 0.05% (5 cents per $100 invested). Compare that to typical 401(k) fees of 0.5-1.5%. This alone can save you tens of thousands over your career.
2026 Update: TSP Is Protected From the DOL 401(k) Private Equity Rule
On March 30, 2026 the Department of Labor proposed a rule (Federal Register doc 2026-06178, RIN 1210-AC38) that creates a fiduciary safe harbor for putting private equity, private credit, real estate, infrastructure, and crypto into private-sector 401(k) plans, including default funds (QDIAs). About 84% of auto-enrolled 401(k) participants are in QDIAs, so the practical effect is that millions of private-sector workers could end up holding illiquid alternatives without ever picking them.
The TSP is exempt by statute. Title 5 U.S. Code § 8438 locks the TSP investment universe to the G/F/C/S/I funds plus the mutual fund window. The Federal Retirement Thrift Investment Board (FRTIB) cannot add asset classes without an act of Congress. The 2009 Thrift Savings Plan Enhancement Act (P.L. 111-31) authorized the mutual fund window, and FRTIB still took 13 years to launch it in 2022. That precedent shows what TSP changes look like: slow, statutory, transparent.
The fee gap matters. TSP expense ratios run 0.034% to 0.051%. Private equity funds typically charge 1.61% to 2% in management fees plus 20% of profits as carried interest. The fee differential is roughly 40 to 55 times higher for PE compared to TSP. On a $200,000 balance over 20 years, that compounds into roughly $80,000 to $100,000 of foregone wealth before carried interest is even applied.
Three things federal employees should know. Your TSP is safe from this rule. Your spouse’s private-sector 401(k) may not be. And if you roll your TSP to an IRA at retirement, you lose the statutory protection because IRAs are not covered by ERISA or this rule. See our DOL 401(k) Private Equity Rule deep dive for the full comparison table and the comment template (June 1, 2026 deadline).
2026 TSP Contribution Limits
Under Age 50
Age 50+
Ages 60-63
New for 2026: Super Catch-Up
The SECURE 2.0 Act introduced a higher catch-up limit for ages 60-63. You can contribute an extra $11,250 instead of $8,000. This is a great opportunity to boost savings right before retirement.
Agency Matching (Free Money)
FERS employees receive agency contributions even if you don't contribute anything yourself. But to get the FULL match, you need to contribute at least 5% of your salary.
How Matching Works
| Your Contribution | Agency Automatic | Agency Match | Total You Get |
|---|---|---|---|
| 0% | 1% | 0% | 1% |
| 1% | 1% | 1% | 3% |
| 2% | 1% | 2% | 5% |
| 3% | 1% | 3% | 7% |
| 4% | 1% | 3.5% | 8.5% |
| 5%+ | 1% | 4% | 10% |
Bottom line: Contribute at least 5% to get the full 5% agency contribution. That's a 100% return on your first 3% and 50% on the next 2%.
Don't Leave Money on the Table
If you're not contributing at least 5%, you're leaving FREE MONEY behind. Even if you can't max out TSP, always contribute at least 5% to get the full match.
Roth vs Traditional TSP
Traditional TSP
- ✓ Contributions are pre-tax
- ✓ Reduces current taxable income
- ✓ More money invested upfront
- ✗ Withdrawals taxed as income
- ✗ RMDs required at 73
Best for: High earners, near retirement, expect lower taxes in retirement
Roth TSP
- ✓ Withdrawals are 100% tax-free
- ✓ Tax-free growth
- ✓ Hedge against future tax increases
- ✗ No current tax deduction
- ✗ RMDs required (roll to Roth IRA to avoid)
Best for: Young employees, lower tax bracket now, expect higher taxes later
Pro tip: Many financial advisors recommend having BOTH Traditional and Roth TSP. This gives you tax flexibility in retirement, withdraw from Traditional in low-income years and Roth in high-income years.
Roth In-Plan Conversions Now Available
Starting January 28, 2026, you can convert Traditional TSP to Roth TSP directly within your account. This eliminates the need to roll out to an IRA first.
Conversion Rules:
- • Minimum: $500 per conversion
- • Maximum: 26 conversions per year
- • Must leave $500 in each source
- • Available in My Account on TSP.gov
Tax Considerations:
- • Converted amount is taxable income
- • TSP does NOT withhold taxes
- • Pay via estimated taxes or W-4
- • Conversions are irreversible
Best for: Low-income years, market downturns (convert more shares for same tax), reducing future RMDs, or building tax-free retirement income.
TSP Fund Options
| Fund | Full Name | Risk | Description |
|---|---|---|---|
| G Fund | Government Securities | Lowest | Short-term US Treasury securities. Never loses money but low returns. |
| F Fund | Fixed Income Index | Low | Tracks Bloomberg Barclays US Aggregate Bond Index. |
| C Fund | Common Stock Index | Medium | Tracks S&P 500. Large US companies. Core holding for most investors. |
| S Fund | Small Cap Stock Index | Medium-High | Tracks Dow Jones US Completion Total Stock Market Index. Small/mid cap. |
| I Fund | International Stock Index | Medium-High | Tracks MSCI EAFE Index. International developed markets. |
| L Funds | Lifecycle Funds | Varies | Target-date funds. Automatically rebalance as you approach retirement. |
Investment Strategy
Simple Approach: L Funds
If you don't want to manage your allocation, use an L Fund (Lifecycle). Pick the fund closest to your retirement year (e.g., L 2045). It automatically rebalances from aggressive (more stocks) to conservative (more bonds) as you age.
DIY Approach: C/S/I Mix
Many investors prefer a simple mix of C, S, and I funds for maximum growth potential:
As you approach retirement (within 5-10 years), gradually add F and G funds to reduce volatility.
TSP Withdrawal Options
When you retire or separate from federal service, you have several withdrawal options:
- Leave it in TSP: Continue tax-deferred growth, low fees. Withdraw when needed.
- Partial withdrawal: Take some money, leave the rest invested.
- Full withdrawal: Lump sum, monthly payments, or life annuity.
- Roll over to IRA: More investment options, but potentially higher fees.
The 4% Rule
A common retirement strategy: withdraw 4% of your balance in year one, then adjust for inflation. Research shows this strategy historically lasts 30+ years without running out of money.
4% Rule Example
- TSP Balance at retirement: $500,000
- Year 1 withdrawal (4%): $20,000
- Year 2 (3% inflation): $20,600
- Year 3 (3% inflation): $21,218
Adjust the percentage based on market conditions and other income sources.
Required Minimum Distributions (RMDs)
Starting at age 73, you must withdraw a minimum amount from Traditional TSP each year. The amount is based on your balance and IRS life expectancy tables.
Roth TSP also has RMDs, unlike Roth IRAs. To avoid this, roll your Roth TSP to a Roth IRA after separating, Roth IRAs have no RMDs.
Early Withdrawals: The 72(t) Rule
Need TSP access before age 55? The 72(t) rule, also known as Substantially Equal Periodic Payments (SEPP), lets you withdraw penalty-free at any age if you commit to fixed payments for at least 5 years.
72(t) vs Rule of 55
| Feature | 72(t) Rule | Rule of 55 |
|---|---|---|
| Age requirement | Any age | 55+ at separation |
| Lock-in period | 5 years or until 59½ | None |
| Payment flexibility | Fixed amount | Withdraw any amount |
| Best for | Under 55 separators | 55+ retirees |
Warning: Breaking the 72(t) rules (stopping early, changing amounts, or taking extra withdrawals) triggers the 10% penalty retroactively on all prior withdrawals.
Learn more in our detailed guide: TSP 72(t) Rule: How to Access Your TSP Before 55 Without Penalty