The Thrift Savings Plan (TSP) Explained

For military service members, securing a solid financial future starts with understanding the Thrift Savings Plan (TSP)—the government’s version of a 401(k). Whether you’re active duty or a reservist, contributing to your TSP can help you build long-term wealth and prepare for retirement.

What is the Thrift Savings Plan (TSP)?

The Thrift Savings Plan (TSP) is a tax-advantaged retirement savings plan for federal employees and military personnel. It’s designed to function similarly to a private-sector 401(k), offering military members an easy way to invest for retirement with low fees and automatic payroll deductions.

Key Benefits of the TSP

• Low Fees – One of the lowest-cost retirement plans available.
• Automatic Payroll Contributions – Easy and consistent saving once contributions are set.
• Government Matching (for Blended Retirement System aka BRS Members) – Free money up to 5% of your base pay.
• Tax Advantages – Choose between traditional (tax-deferred) or Roth (tax-free withdrawals). You can read about whether traditional or Roth makes sense for you here.
• Diverse Investment Options – Includes index funds and lifecycle funds.

TSP Contribution Options: Traditional vs. Roth

• Traditional TSP: Contributions are made pre-tax, lowering taxable income now, but withdrawals in retirement are taxed.
• Roth TSP: Contributions are made after-tax, meaning withdrawals in retirement (including earnings) are 100% tax-free.

📌 Pro Tip: If you expect to be in a higher tax bracket in retirement, consider the Roth TSP for tax-free withdrawals later! You can take advantage of your lower tax rate now to better prepare yourself for the future.

How Much Should You Contribute?

To maximize your retirement savings, aim to contribute at least 5% of your base pay—this ensures you get the full government match under the Blended Retirement System (BRS). In 2025, the annual contribution limit is $23,500 ($31,000 if age 50+).

TSP Investment Options

The TSP offers five core index funds and L (Lifecycle) Funds:

• G Fund – Government securities (low risk, low return)
• F Fund – Bonds (moderate risk, stable growth)
• C Fund – S&P 500 (large U.S. stocks)
• S Fund – Small/mid-cap U.S. stocks
• I Fund – International stocks
• L Funds – Target-date retirement funds that adjust automatically

How to Enroll in the TSP

1. Log into MyPay and select TSP contributions.
2. Choose your contribution percentage (aim for at least 5% for the match!).
3. Select Traditional or Roth TSP (or a mix of both).
4. Pick your investment funds based on risk tolerance and retirement goals.

TSP vs. Other Retirement Accounts

Final Thoughts

The TSP is a powerful wealth-building tool for military members. By taking advantage of the government match, low fees, and tax benefits, you can set yourself up for a comfortable retirement.

Want more military personal finance tips? Subscribe to the Spark to FIRE newsletter for insights from me on saving, investing, and growing wealth!