The Thrift Savings Plan (TSP) is a retirement savings plan for federal employees, and since 2000, it has been open to military personnel. The TSP is a defined contribution plan, similar to the 401(k) plans that many private companies offer their employees. As with any defined contribution plan, the income you receive from your TSP account will depend on how much you put into the account and the earnings on your investments.
In contrast, the uniformed services retirement system is a defined benefit plan. The retirement benefit you receive is based on your years of service and the rank you hold at the time of your retirement. Please visit the Department of Defense, Defense Finance and Accounting Service for additional information on military retirement and benefits.
Unlike the uniformed services retirement system, participation in the TSP is optional; you must sign up for a TSP account with your service. You contribute to the TSP from your own pay; currently, the services do not match contributions. Your contributions and the earnings on your investments belong to you. They are yours to keep even if you do not serve the 20 or more years typically needed to receive uniformed services retirement pay.
TSP contributions are not taxed until withdrawn. Your TSP account may include contributions from pay subject to the combat zone federal income tax exclusion. The TSP will track this so that when you withdraw the money in retirement, you will not have to pay taxes on the funds contributed from a designated combat zone.
Upon retirement, if you use your TSP account balance to purchase an annuity, the annuity provider will calculate the taxable and tax-exempt portion of each annuity payment based on the proportion of taxable and tax-exempt funds used to purchase the annuity.
The TSP also offers the following:
The TSP website provides account information, including online statements. You may allocate contributions, make inter-fund transfers, and initiate (and possibly complete) loan and withdrawal requests online.