Kirk G. Meyer - Thrift Savings Plan: A Practical Guide to the TSP

Thrift Savings Plan:

A Practical Guide to the TSP

By

Kirk G. Meyer

Thrift Savings Plan:

A Practical Guide to the TSP

Copyright 2014 by Kirk G. Meyer

All rights reserved. This includes the right to reproduce any portion of this book in any form.

Disclaimer: Every effort was made to describe the information in this book accurately as of the publication date. The author makes no guarantees regarding the information of this book.

Why I Wrote this eBook

I f you are like me , you work for the government or are the spouse of someone who works for the government, and no one explained the Thrift Savings Plan or TSP to you. I do not know about your agency, but mine does not explain the TSP to anyone, be that a new hire or a seasoned employee. No one is in the human resource office to answer even the most basic TSP question. And let's face it, if you are a FERS employee, the TSP will play a significant role in your retirement. While this eBook is not an all-encompassing reference for the TSP, it addresses many of the essential things you need to know about the TSP.

Why You Should Buy this eBook

A gain, as I stated in the previous section, agencies do a terrible job explaining the TSP, how it works, how important it is to your retirement, or how to make changes to your TSP account. This eBook goes into those details to help you understand the TSP, its importance, and how to manage your TSP account to a degree. This eBook makes up for some of the shortfalls of various agencies when it comes to the employee and explaining the TSP's inner workings. That is where Thrift Saving Plan: A Practical Guide to the TSP comes in handy.

My GIFT to You!

A s a big thank you for getting Thrift Savings Plan: A Practical Guide to the TSP, I want to offer you valuable gifts and a chance to get some on-going financial advice. Just for getting this book, it entitles you to my Budget Spreadsheet and Debt Reduction Spreadsheet I usually sell for $10. It is yours free for getting Thrift Savings Plan: A Practical Guide to the TSP and signing up for my free email newsletters that have previews to my eBooks. These special articles are geared towards personal finance and now access to these two useful spreadsheets. To get your spreadsheets now, simply go to my blog's website and sign up today. Visit http://bit.ly/KGMLetter to get your free valuable spreadsheets.

Introduction

T he Thrift Savings Plan or TSP is a retirement benefit of US federal government employees similar to private employers' 401(k) plans. The TSP is open to all federal employees and uniformed service members and designed as a long-term savings plan utilized for retirement. And like private 401(k) plans, the TSP is offered as a Traditional TSP or the newer ROTH TSP. The original TSP was first created by Congress in 1986, evolving over the years to resemble what federal employees and uniformed service members can utilize for their retirement today.

Some advantages of the TSP over that of traditional 401(k) plans and individual retirement accounts are that it boasts some of the lowest fees of any investment offered to federal employees, uniformed service members, or the investing public. While at first, it may appear that the TSP does not offer enough options for a plan participant to diversify, that could not be further from the truth. Like many private 401(k) plans, the federal government offers an agency match for Federal Employees Retirement System (FERS) employees. Compounded over one's entire career, the TSP combined with retirees' pension annuity and social security supports one's retirement from the federal government.

Since August of 2010, all new FERS employees have been enrolled in the TSP by default. As a new employee, the participant's agency has started the TSP with a 3% automatic contribution of the participant's base salary. This is besides the 1% automatic agency contribution, and the 3% is matched 100% by the agency. The fourth and fifth percentage of the participant's base salary contributed to the TSP. It is matched 50% on each dollar. At a minimum, a FERS employee should contribute the initial 5% to take full advantage of the agency's matching program. After the TSP account is created, a participant may access the account through the TSP's website at www.tsp.gov.

Any participant may elect to have funds invested in a Traditional TSP or the newer ROTH TSP. In 2014 a participant may elect to contribute up to $17,500, and participants over the age of 50 are allowed an additional $5,500 in catch-up contributions. Regardless of how a participant elects to have contributions treated, the agency matched funds. The automatic 1% agency contribution is allocated to a Traditional TSP since taxes have not been paid on those funds as on the ROTH TSP funds. The treatment of a participant's contributions will be examined in much more detail in that section of the booklet. It may be best to consult a financial planner or tax expert before determining how a participant should elect to treat their contributions.

The maintenance of a participant's TSP can simply be done on the TSP website. The site allows for many options, such as re-allocation of assets between funds or inter-fund transfers. It will also allow a participant to change the asset allocation between the TSP's ten funds. The site is also the location where a participant can initiate any loans taken out against the TSP value. If the participant needs to find forms used in the proper maintenance of the TSP account, also found on the TSP website. Like many 401(k) plans, the TSP allows for transferring retirement assets into the TSP plan, provided they meet the plan's guidelines. It is also similar to other retirement accounts in that the TSP is passed to heirs by using a beneficiary designation.