Put plainly, the Thrift Savings Plan (TSP) is a type of retirement plan made available to federal government employees, including uniformed service members and members of Congress. It is similar to a 401(k) plan offered by private employers—it enables federal employees to set pre-tax contributions aside for investment options with funds that ultimately pay toward retirement. By educating yourself on the ins and outs of a TSP, you can reap the rewards of your investment for years to come.
Currently featuring more people than the number of citizens across several countries, the TSP is a government-created retirement program with over 99,000 millionaires. Its net worth is also larger than several nations across the globe, something the private sector is incapable of touching. As a federal employee, the Thrift Savings Plan (TSP) is a must-have you don’t want to miss out on, with advantages that will pay off well into your retirement years. Before you miss out on the available perks, please consider how the TSP was created and how it was intended to benefit government employees.
Introduced as part of the Federal Employees Retirement System Act in the 1980s, the Thrift Savings Plan (TSP) provided workers with investment opportunities much like a 401(k). The rule since its inception was to keep the TSP simple and affordable, with low administrative fees. Federal workers can make contributions up to $20,500 per year for those younger than 50. Anyone older than 50 years may take advantage of the $6,500 catch-up limit. The government also matches contributions, much like a 401(k), for anyone eligible within the Federal Employees Retirement System (FERS). For example, by contributing 5% of your salary, you are eligible to receive an additional 5%.
Depending on your plan, the overall cost of a TSP is arguably one of its best features, with expense ratios averaging to a mere 0.058% (for the F Fund). In terms of fees, for each $10,000 held within your plan, you should project paying as much as $5.80 annually. The differences between a TSP and the average cost of a 401(k) equates to additional savings you could invest toward maximizing your TSP retirement savings.
Upon reaching the age of 59 ½, TSP participants may begin making withdrawals without risk of a penalty with a few exceptions (including death or permanent disability). Should you start suffering from adverse health conditions spelled out by the TSP, you may qualify to withdraw early. This is not without exemption, though, and comes with a penalty of 10% additional taxes on the withdrawn amount. However, once you reach 72, you will be required to make TSP withdrawals. Taxes are also not paid until you begin taking distributions upon reaching the minimum age.
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M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].
