Thrift Savings Plan

Summary

The Thrift Savings Plan (TSP) is a tax-deferred retirement savings and investment plan that offers Federal employees the same type of savings and tax benefits that many private corporations offer their employees under 401(k) plans. By participating in the TSP, Federal employees have the opportunity to save part of their income for retirement, receive matching agency contributions, and reduce their current taxes.

The TSP is a defined contribution plan, which means that the income received from individual TSP account will depend on how much the employee (and the agency, if the employee is eligible to receive agency contributions) put into the employee’s account during a certain number of working years and the earnings accumulated over that time. If an employee is covered by FERS (the Federal Employees’ Retirement System, the TSP is one part of a three-part retirement package that also includes the FERS basic annuity and Social Security. If an employee is covered by CSRS (Civil Service Retirement System, the TSP is a supplement to the CSRS annuity pay.

Why was the article written about the topic at the current time?

The article, Bumpy Ride for Thrift Savings Plan Investors But Patience Was Rewarded, is about how 2010 was a stressful for the stock market investors including the federal employees covered under TSP. Midway through the year, all of the underlying TSP funds were down. In the 2010 “Flash Crash”, these were the results for the TSP funds: I fund was down .56, S fund was down .66, C fund was down .45, F fund was up .06 and G fund was up .0012. Most of the gains for the stock market in 2010 came in the last half of the year.

The stock market went up more than 19%, as measured by the Down Jones Industrial Average. For TSP investors, the C fund was up 15.06%. The small cap fund gained 29.06%, while the I fund gained 7.94%

In spite of a dramatic one-day drop in May 2010, the funds ended gaining a...