Page 52 - The Informed Fed--Hearn (edited 10.29.20)
P. 52

CHAPTER FIVE


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                        Thrift Savings Plan (TSP)


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                   The  Thrift  Savings  Plan  (TSP)  was  implemented  as  part  of  the
               Federal  Retirement  benefits  package  and  serves  as  a  vehicle  to
               accumulate retirement funds. Technically it is NOT a 401k because it
               falls under the direction and control of Congress. For the purpose of
               understanding how it works, it shares most of the pluses and minuses of
               all other 401k plans. On the plus side, in 1984 when the FERS program
               was  started,  Congress  established  5%  matching  funds  for  FERS
               employees as an incentive to encourage retirement savings. This is one
               of the best programs in the country and provides FREE MONEY to
               FERS employees for their retirement. The government will contribute
               1% of a FERS employee’s salary to their TSP fund whether they choose
               to contribute or not. (This is separate from the FERS retirement fund
               and  is vested after 3  years.) They will  also match the first 3% of an
               employee’s contributions dollar for dollar, and 50 cents for every dollar
               of the next 2% the employee puts in, making a total of 5% government
               funds to match the first 5% of an employee’s contribution. These are
               funds you cannot make up later, so it is beneficial to maintain a 5%
               contribution to the TSP from day one of eligibility. A FERS employee
               can build a substantial nest egg by sticking to this savings pattern and
               allow the government to provide them a 100% return on this money.




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