The Pros and Cons of Thrift Savings Plans

So what are Thrift Savings Plans or TSP’s?

It’s a savings plan for both current and retired federal employees and was created in 1986 by the Federal Employees Retirement System. The TSP program is designed to give federal employees the same benefits of a 401(k) plan that private sector employees receive. It’s simple, and all contributions made to a TSP plan will be directly deducted from the employee’s paycheck.

There are six different types of funds that comprise the Thrift Savings Plan:

  1. Government Security Fund – Low-risk investments backed by the government.
  2. Fixed-Income Fund – Type of investment paying a return on a fixed schedule.
  3. Common Stock Fund – Mutual funds investing in publicly traded company stocks.
  4. Small Cap Stock Fund – Companies with a relatively small market capitalization.
  5. International Stock Fund – Investing in securities: a cost-effective way to own shares in global companies.
  6. A Life Cycle Fund – Mutual Funds that are balanced and adjusted from high to low risk as the investor gets older or reaches retirement. 

The Thrift Savings Plan is a tax-deferred contribution that will not be taxed until the customer withdraws money. Most people do so after they retire or when they separate from Federal service. There are multiple withdrawal options when discontinuing the TSP. It is crucial to investigate what the best option will be for your situation.

There are also several benefits to having Thrift Savings Plans such as:

  • Agency Matching Contributions
  • Agency Automatic Contributions
  • Catch Up Contributions
  • Low Expense Ratios

There are also some disadvantages to having a Thrift Savings Plans:

  • Limited investment choices
  • Limited tracking in money software
  • Hard to track gains
  • Inability to contribute after government service ends
  • Vulnerable to performance of the stock market

To learn more about other options for saving for the future, please visit