The Thrift Savings Plan (TSP)is a popular Federal government-sponsored tax-deferred retirement savings and investment scheme in America. Under the project, people working for the government get the opportunity to save a portion of their remunerations for their retirement. This plan is almost identical to the 401(K) plan, which private companies offer their employees.
Jeffery Small is a prominent financial advisor from Florida and the best-selling book ‘Turning Financial Planning Right-Side Up.’ His area of expertise lies in helping to formulate a viable economic strategy to achieve their retirement goals. Currently, he is the founder and President of Arbor Financial Services of Florida, Inc. This is a famous SEC-registered investment advisory firm and a franchisee of the Retirement Income Store.
According to the Jeffrey Small Arbor Financial team of specialists, people working for the Federal government want to participate in the Thrift Savings Plan to save for their retirement. To do so, they have to meet the following criteria:
- Be on the payroll of the Federal Employees Retirement System (FERS) from 1st January 1984,
- Works employees of the Civil Service Retirement System (CSRS) from 1st January 1984,
- Serve as members of America’s uniformed services either on active duty or Ready Reserve, or
- Perform duties as a civilian in any other specific categories of the Federal government service,
How does the Thrift Savings Plan work?
Government employees and military personnel who complete at least 60 days of continuous service can automatically enroll under the scheme. Then, they need to make regular pre-tax monetary contributions under the plan. It is prudent to deposit an amount equivalent to 15% of their monthly remuneration, which is not taxable. Their employers will also make a matching contribution to this retirement scheme on their behalf. The federal government then invest this sum of money in any one of the following investment schemes as per the depositors’ choice:
- The G Fund, which consists of government securities like treasuries,
- The F Fund has the corporate and governmental bonds on major stock exchanges,
- The C Fund is essentially a stock market index scheme representing S&P 500 companies, or
- The I Fund is an international stock index scheme mirroring the MSCI EAFE Index.
When employees retire from the federal government or military service, they can choose to:
- Retain the money in the Thrift Savings Plan and withdraw it when they reach the age of 70½,
- Make monthly cash withdrawals from the Thrift Savings Plan until the money lasts,
- Annuitize their total monetary contribution in the Thrift Savings Plan with Met-Life Insurance, or
- Transfer the Thrift Saving Plan gift to their retirement account (IRA).
The Jeffrey Small Arbor Financial team of experts concludes that the thrift Savings Plan is an ideal investment scheme for federal government employees and armed forces personnel. The system allows them to make pre-tax monetary contributions to a fund that help them save for
retirement. Moreover, the federal government, on their part, makes a matching contribution to the scheme.