There is no waiting period. Contributing to the TSP also reduces your taxable income. The more you contribute the less tax you pay up front. Follow Mike on Twitter and send him an email with your questions and comments. Subscribe on Apple Podcasts or Podcast One. Listen Live Schedule Sports. Artificial Intelligence. Ask the CIO. Big Data. CIO News. Cloud Computing. IT Modernization. On DoD. Defense Industry. Agency Oversight. Open Season. Mike Causey.
Tom Temin. Accelerating Government. Ask the CIO Podcasts. Business of Government Hour. Every Side of Cyber. Federal Drive. Federal Executive Forum. But while thousands of civilian and military employees defer a portion of their earnings into the plan each year, many participants do not understand the actual fund options available or are unsure which funds are appropriate for them.
This article breaks down the five core investment funds available in the TSP along with the Lifecycle funds and their proper use. The five core funds offered in the Thrift Savings Plan loosely cover the basic range of publicly traded debt and equity securities. None of them trade on any public exchange, although Blackrock does offer publicly traded equivalents of some TSP funds through iShares , its subsidiary company, which offers a comprehensive range of ETFs.
Four of the five funds are index funds , which hold securities exactly matching a broad market index. The money participants place in the F and C Funds is invested in separate accounts, while the S and I Fund monies are invested in trust funds commingled with other tax-exempt pension and endowment funds. Each TSP fund's share price is calculated daily and reflects investment returns minus administrative and trading costs.
The five funds are broken down below. This is the only core fund that does not invest in an index. This fund thus has the lowest risk of the five funds, and all money contributed into the TSP is placed into this fund by default unless the participant specifies otherwise.
It pays an interest rate based on nonmarketable short-term treasury securities with a maturity of a few days to 52 weeks.
The G Fund has historically provided the lowest rate of return of any of the core funds. This index invests in a wide range of debt instruments, including publicly traded treasury and government agency securities , corporate and foreign bonds, and mortgage-backed securities MBS.
This fund also pays monthly interest typically exceeding that paid by the G Fund. This fund is the most conservative of the three stock funds available in the TSP. This fund has experienced greater volatility than either the G or F Funds and has posted commensurately higher returns over time.
Completion Total Stock Market Index. It has outperformed the C Fund with proportionately greater volatility over time. The Barclays iShares has no exact S Fund equivalents. Those who wish to duplicate this fund outside the TSP could use the following four funds to cover many of the companies in the S Fund and some that are not :. This is one of the broader international indexes investing in larger, more established companies located in 22 developed countries around the world.
This fund is the only one in the TSP that invests in companies outside the U. The Lifecycle funds are composite funds that invest in a combination of the five core funds and act like target-date funds by nature. They are designed and managed by the portfolio managers at Blackrock Capital and function as "automatic pilot" funds for participants who do not wish to make their own asset allocations.
The TSP was created to give federal workers the opportunity to invest in a tax-advantaged account for retirement, similar to a k plan. Just like a k , TSP contributions can be taken straight out of your paycheck, and you can invest that money in a variety of different funds. In order to be eligible to contribute to the TSP, you must be employed by the federal government or be a member of the military. When the Thrift Savings Plan was created, there was only one tax treatment option available for your contributions: traditional.
But in , the Thrift Savings Plan started accepting Roth contributions as well. With a traditional tax treatment option, your contributions are made with pre-tax dollars taken out of your gross earnings , but you have to pay taxes on your withdrawals in retirement based on your tax bracket at that time. Roth contributions are made after taxes have been taken out of your paycheck. We always recommend going with a Roth option when you have the chance.
The second benefit is an emotional one. And then the nest egg you worked so hard to build is all yours in retirement. Getting a match on your contributions is free money!
Keep in mind that the match your agency or service puts in your account will be taxed in retirement, even if you make Roth contributions.
You also leave enough margin in your budget to make progress on other financial goals like saving for college and paying off your house.
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