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).
5%
Agency matching (free money!)
$24,500
2026 contribution limit
0.05%
Expense ratio (lowest in industry)
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 TSP Contribution Limits
Under Age 50
$24,500
Regular contribution limit
Age 50+
$32,500
$24,500 + $8,000 catch-up
Ages 60-63
$35,750
$24,500 + $11,250 super catch-up
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
Tax benefit: Now (reduces taxable income)
- ✓ 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
Tax benefit: Later (tax-free withdrawals)
- ✓ 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.
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:
60%
C Fund
Large US companies
20%
S Fund
Small/mid US companies
20%
I Fund
International diversification
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.
Frequently Asked Questions
What is the TSP contribution limit for 2026?↓
The 2026 TSP contribution limit is $24,500 for regular contributions. If you're 50+, you can add $8,000 catch-up for $32,500 total. Ages 60-63 get a "super catch-up" of $11,250 for $35,750 total.
How does TSP agency matching work?↓
FERS employees get automatic 1% contribution (no match required) plus matching: 100% match on first 3% you contribute, 50% match on next 2%. To get the full 5% match, you must contribute at least 5% of salary.
Should I choose Roth or Traditional TSP?↓
Traditional: Tax deduction now, pay taxes in retirement. Roth: No deduction now, tax-free withdrawals later. Choose Roth if young or expecting higher taxes in retirement. Traditional if near retirement or in high tax bracket now.
What are the TSP fund options?↓
G Fund (government bonds), F Fund (bond index), C Fund (S&P 500), S Fund (small/mid cap), I Fund (international), and L Funds (lifecycle/target date). Most experts recommend C, S, and I funds for long-term growth.
What is the 4% rule for TSP withdrawals?↓
The 4% rule suggests withdrawing 4% of your balance in year one of retirement, then adjusting for inflation annually. This strategy historically lasts 30+ years. More conservative: 3.5%, more aggressive: 4.5%.
When do TSP Required Minimum Distributions start?↓
RMDs begin at age 73. You must withdraw a minimum amount based on IRS life expectancy tables. Unlike Roth IRAs, Roth TSP is also subject to RMDs (unless you roll it to a Roth IRA).