The Thrift Savings Plan and its agency match

How it works

A participant chooses a percent of basic pay to defer, traditional or Roth, up to this year's official tsp elective deferral limit (not yet verified here; see the official source below) for the year, with a catch up for those 50 and over of this year's official tsp catch up 50 (not yet verified here; see the official source below). Under the Federal Employees Retirement System and the military's Blended Retirement System, the agency puts in an automatic 1 percent of pay whether or not the worker contributes, then matches dollar for dollar on the first 3 percent of pay and fifty cents on the dollar for the next 2 percent, so a worker who contributes 5 percent receives 5 percent from the agency. The automatic 1 percent vests after a service period set by the system, while matching money vests at once. The fund menu is the G, F, C, S, and I funds plus Lifecycle funds that blend them, with expense ratios among the lowest of any plan.

What it gives

The agency match brings the total to 10 percent of pay when the worker contributes 5 percent.

Fund costs are very low, which leaves more of each year's return in the account.

The G Fund pays interest on government securities with no risk of losing principal.

What it costs, or where the catch is

A worker who contributes less than 5 percent leaves part of the match formula unused every pay period.

The fund menu is narrow, and a person who wants a sector fund or a single stock has to go elsewhere.

The automatic 1 percent is forfeited by a worker who leaves before the vesting period ends.

A worked example

Keisha is a federal employee earning $64,000 who contributes 5 percent, which is $3,200 a year. Her agency adds the automatic 1 percent, $640, plus a full match on the first 3 percent, $1,920, plus half on the next 2 percent, $640. The agency money totals $640 plus $1,920 plus $640, which is $3,200, so $6,400 reaches her account each year.

Where it goes wrong

The common miss is leaving the contribution at the default percent set at hiring, which may sit below the 5 percent that captures the whole match.

Who confirms it for you

For your own numbers, the plan administrator or HR. This page explains how the rule works for people in general; it does not know your situation and does not tell you what to do.

The official source

TSP: Making contributions. Every figure that changes by year comes from the site's rules table, which the watcher checks against the official page on a schedule; where a figure is not yet verified, this page says so instead of printing a number.