Your TSP, decoded.

The Thrift Savings Plan is the government's version of a 401(k) — a tax-advantaged retirement savings account. The key advantage: TSP has an expense ratio of just 0.04%, meaning you pay $0.40 per year for every $1,000 invested. Civilian 401(k) plans typically charge 0.5%–1.0%, or $5–$10 per $1,000. Over a 20-year career, that fee difference alone can mean tens of thousands more in your pocket.

Under the Blended Retirement System (BRS), the Department of Defense automatically contributes 1% of your base pay to your TSP — even if you contribute nothing. On top of that, DoD matches your contributions up to an additional 4%. That's 5% of your base pay in free money every month.

The IRS sets an annual limit on how much you can put into TSP. For 2024, the limit is $23,000 for regular contributions (elective deferrals). If you're 50 or older, you can contribute an additional $7,500 in catch-up contributions, for a total of $30,500. These limits typically increase slightly each year.

Your own contributions and any earnings on them are always 100% yours — immediately. The DoD automatic 1% contribution and matching contributions vest (become permanently yours) after 2 years of service. If you separate before 2 years, you keep your money but lose the government's contributions.

Contributions are pre-tax, which lowers your taxable income right now. You pay no taxes on the money going in. The trade-off: when you withdraw in retirement, every dollar — contributions AND growth — is taxed as ordinary income. You're deferring taxes, not eliminating them.

Contributions are post-tax — you pay income tax on the money going in. The massive advantage: all growth and all withdrawals in retirement are completely tax-free. You'll never pay another dollar of tax on that money, no matter how much it grows over 20, 30, or 40 years.

For most junior enlisted (E-1 through E-6), Roth TSP is the clear winner. You're in one of the lowest tax brackets you'll ever be in, especially when you factor in tax-free allowances (BAH, BAS) that keep your taxable income low. Pay a small amount of tax now while your rate is cheap, and let decades of growth happen tax-free.

When you're in a Combat Zone Tax Exclusion (CZTE) area, your income is tax-free. If you make Roth contributions during CZTE, you pay zero taxes going in AND zero taxes coming out. It is genuinely free money growth. This is the single best financial opportunity in the entire military — your Roth contributions during combat deployment cost you absolutely nothing in taxes.

The safest fund in TSP. Invested in special-issue U.S. Treasury securities. Your principal is guaranteed by the federal government — you cannot lose money. The catch: returns barely keep pace with inflation. Historically 2–3% annually. This is where ALL your money goes by default, which is the single biggest problem with TSP.

Tracks the Bloomberg U.S. Aggregate Bond Index. Slightly higher returns than G Fund with slightly more risk. Still a conservative option. Historically returns 4–6% annually. Useful as a stabilizer in a diversified portfolio, but not a growth engine.

Tracks the S&P 500 — the 500 largest U.S. companies (Apple, Microsoft, Amazon, etc.). This is the core growth engine of TSP. Historical average return of approximately 10% annually over long periods. Yes, it goes down in bad years. It also recovers and has never failed to reach new highs over any 15+ year window in history.

Tracks the Dow Jones U.S. Completion Total Stock Market Index — small and mid-size U.S. companies NOT in the S&P 500. Higher risk and higher potential reward than C Fund. More volatile year to year, but captures growth from smaller, faster-growing companies.

Tracks the MSCI EAFE Index — large companies in Europe, Australasia, and the Far East. Provides diversification outside the U.S. market. Returns have historically lagged U.S. markets over the last decade, but international and U.S. markets trade leadership over longer periods.

Professionally managed blends of G, F, C, S, and I Funds that automatically rebalance as you approach your target retirement year. L 2050 is aggressive now (heavy stocks), shifting conservative as 2050 approaches. The ultimate "set it and forget it" option. Available in L 2025, L 2030, L 2035, L 2040, L 2045, L 2050, L 2055, L 2060, L 2065, and L Income (already retired).

TSP automatically puts 100% of your contributions into the G Fund — the lowest-return option. The G Fund barely beats inflation, which means your money's purchasing power is essentially frozen for your entire career. This is the number one TSP mistake and it costs service members hundreds of thousands of dollars over a career. You MUST change this allocation.

The most common recommendation for young service members (under 35) with decades until retirement. Puts 80% in the S&P 500 (C Fund) and 20% in small-cap stocks (S Fund), giving you exposure to essentially the entire U.S. stock market. Maximum growth potential, highest volatility — but time erases volatility.

Pick the L Fund closest to the year you plan to retire or turn 62. It automatically adjusts from aggressive (stocks) to conservative (bonds) over time. You never have to touch it, rebalance, or think about allocation. It just works.

Adds international diversification to the aggressive approach. 60% in large U.S. stocks (C Fund), 20% in small U.S. stocks (S Fund), and 20% in international stocks (I Fund). This is the closest thing to a "total world stock market" portfolio available in TSP.

You can borrow from your own TSP balance for two purposes: General Purpose (repay within 1–5 years) or Residential (repay within 1–15 years, for buying a primary residence). You're borrowing from yourself and paying interest back to yourself. Sounds harmless, but the money you withdraw stops growing — and lost compound growth is money you never get back.

Available for financial hardship (medical expenses, foreclosure prevention, funeral costs, etc.). Unlike a loan, you don't pay it back — the money is gone from your TSP permanently. You'll owe income taxes on the withdrawal and may owe a 10% early withdrawal penalty if you're under 59 1/2.

When you leave military service, you have three options: (1) Leave the money in TSP and let it keep growing with those low 0.04% fees, (2) Roll it into a civilian IRA or employer 401(k), or (3) Cash it out. Options 1 and 2 preserve your retirement savings. Option 3 destroys them.

After you turn 59 1/2, you can withdraw from your TSP without the 10% early withdrawal penalty. If you're still in the military, you can take an "age-based in-service withdrawal." You still owe regular income taxes on Traditional TSP withdrawals. Roth TSP withdrawals are completely tax-free after 59 1/2 (as long as the account has been open 5+ years).

If you separate from federal service (including military) during or after the calendar year you turn 55, you can withdraw from TSP penalty-free — even though you haven't reached 59 1/2. This is a valuable exception for military retirees who hang up the uniform between 55 and 59.

Starting at age 73 (under current law), you must begin withdrawing a minimum amount from your Traditional TSP each year, whether you need the money or not. The IRS requires this because they want their tax revenue. RMDs are calculated based on your balance and life expectancy. Roth TSP balances are also subject to RMDs unless you roll them into a Roth IRA.

Under BRS, the Department of Defense automatically contributes 1% of your base pay to your TSP — even if you personally contribute nothing. This money shows up in your TSP account automatically. You don't have to do anything to receive it (after vesting at 2 years). It's the government's way of ensuring every service member has at least some retirement savings.

DoD matches your TSP contributions using a tiered formula: The first 3% of base pay you contribute is matched dollar-for-dollar (you put in 3%, DoD puts in 3%). The next 2% is matched at 50 cents on the dollar (you put in 2%, DoD puts in 1%). Total: you contribute 5%, DoD contributes 4% (1% auto + 3% full match + 1% half match) = 5% free. That's your base pay multiplied by 0.05, every single month, for free.

A mid-career retention bonus offered between 8 and 12 years of service (exact timing varies by branch). The minimum is 2.5x monthly base pay for active duty (0.5x for reserves). Your branch may offer more based on critical skill needs. In exchange, you commit to additional service time (typically 3–4 more years).

At retirement, BRS allows you to elect to receive 25% or 50% of your retired pay as a discounted lump sum. In exchange, your monthly retired pay is reduced until age 67, when it returns to full amount. The discount rate is tied to the DoD discount rate, which means you receive significantly less than the actual total value of those payments.