Millions of federal employees and service members save for retirement in one giant plan most Americans have never heard of. A thrift savings plan account, or TSP, is the government's version of a 401k, and it is one of the cheapest retirement plans in the country to use.
If you just started a federal job, joined the military, or are trying to make sense of the account that showed up with your paycheck, here is how it works in 2026.
What Is a Thrift Savings Plan Account?
The TSP is a defined-contribution retirement plan for federal civilian employees and members of the uniformed services. Like a 401k, you contribute a slice of each paycheck before or after taxes, your agency or service can add matching money, and the balance grows tax-advantaged until retirement.
New federal civilian hires are automatically enrolled, typically at a 5% contribution rate, and most service members under the Blended Retirement System are enrolled as well. You manage everything at tsp.gov, including your contribution rate, fund choices, and beneficiaries.
2026 TSP Contribution Limits
The IRS sets TSP limits each year, and 2026 brought increases. As of 2026:
- Regular elective deferral limit: $24,500, covering traditional and Roth contributions combined
- Catch-up limit for ages 50 and up: an extra $8,000, for a $32,500 total
- Higher catch-up for ages 60 to 63: an extra $11,250, for a $35,750 total, under SECURE 2.0
One SECURE 2.0 wrinkle: if your prior-year wages from your employer topped $150,000, your catch-up contributions must go in as Roth. The TSP handles the spillover automatically once you hit the regular limit, so you just set your per-pay-period amount and go.
How the TSP Match Works
If you are under FERS or the Blended Retirement System, the match is the best deal in the plan. Your agency automatically contributes 1% of your pay whether you contribute or not. Beyond that, it matches your first 3% of contributions dollar for dollar and the next 2% at fifty cents on the dollar.
Contribute 5% and you receive the full 5% from the government, doubling that slice of savings instantly. Contribute less and you leave permanent money behind. Note that agency contributions always go into your traditional balance, and the automatic 1% may require a short vesting period, typically two to three years for civilians.
TSP Investment Funds: G, F, C, S, I, and L
The TSP keeps investing simple with five core index funds plus target-date options:
- G Fund: government securities with no risk of loss of principal, a TSP exclusive
- F Fund: tracks the U.S. bond market
- C Fund: tracks the S&P 500
- S Fund: tracks small and mid-size U.S. companies
- I Fund: tracks international stocks
- L Funds: lifecycle funds that mix the five core funds and grow more conservative as your target date approaches
TSP expense ratios have historically run below a tenth of a percent, which undercuts most private-sector 401k funds. Low fees compound quietly in your favor over a 30-year career. All investing carries risk, and returns are never guaranteed, but cost is one variable you fully control.
Traditional vs Roth TSP
You can split contributions between two tax treatments. Traditional contributions lower your taxable income now, and you pay taxes on withdrawals in retirement. Roth contributions are taxed now, and qualified withdrawals in retirement come out tax-free.
A rough rule: if you expect a higher tax bracket later, Roth typically wins. Junior service members and early-career feds often favor Roth while their tax rate is low. Many people split between both to hedge. Tax situations vary, so consider talking to a tax professional before big changes.
TSP Withdrawals, Loans, and Early Access
Money generally stays put until age 59 and a half. Withdraw earlier and you typically owe income tax plus a 10% penalty, with exceptions, including certain withdrawals after separating from service in or after the year you turn 55.
While employed, you can take a TSP loan and repay yourself through payroll, or a hardship withdrawal in genuine emergencies. After separation you can keep the account, take installments, buy an annuity, or roll the balance to an IRA or new employer plan. Required minimum distributions apply in your 70s under current law.
TSP vs 401k vs IRA
| Feature | TSP | 401k | IRA |
|---|---|---|---|
| Who gets it | Federal workers and military | Private-sector employees | Anyone with earned income |
| 2026 employee limit | $24,500 | $24,500 | Much lower annual limit |
| Match | Up to 5% for FERS and BRS | Varies by employer | None |
| Fund lineup | 5 core funds plus L funds | Employer's menu | Nearly unlimited |
| Costs | Historically among the lowest | Varies widely | Varies by broker |
The TSP wins on cost and simplicity. An IRA wins on flexibility. Many federal workers eventually use both.
Pairing Your TSP With Outside Accounts
Maxing your 5% match comes first. After that, an IRA can add flexibility the TSP's five-fund menu cannot. Robinhood offers IRAs with a match on eligible contributions, a rarity that mimics a mini employer match on your personal savings. Terms vary, so check the current offer.
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Frequently Asked Questions
Is a thrift savings plan account the same as a 401k?
They are close cousins. Both are payroll-based retirement plans with the same $24,500 employee contribution limit for 2026. The TSP is only for federal employees and uniformed services members, and it is known for unusually low investment costs.
How much should I put in my TSP?
At minimum, contribute 5% of pay if you are under FERS or BRS, because that unlocks the full government match. Beyond that, many planners suggest working toward 10% to 15% of income for retirement overall, as your budget allows.
Can I lose money in the TSP?
Yes, except in the G Fund, which is guaranteed against loss of principal by design. The C, S, I, and F funds move with markets and can decline. L Funds spread that risk automatically and reduce stock exposure as you near retirement.
What happens to my TSP account when I leave federal service?
You keep it. If the balance is above a small threshold you can leave it invested, keep those low fees, and still rebalance. You can also roll it into a new employer's plan or an IRA, or start withdrawals if you have reached eligible age. Compare fees before rolling out.
