A thrift savings plan is similar to a 401(k) plan but is open only to federal employees and uniformed services personnel. Participants in a TSP can get an immediate tax break for their savings or invest in a Roth for freedom from taxes after retirement.
Hereof, what type of retirement plan is Thrift Savings Plan?
The Thrift Savings Plan (TSP) is a retirement savings and investment plan for Federal employees and members of the uniformed services, including the Ready Reserve.
Similarly one may ask, is TSP a 401k for tax purposes?
The Thrift Savings Plan Enhancement Act of 2009 enabled the Roth TSP option, which lets you fund your account with after-tax money. In both cases, and similar to 401(k) and 403(b) plans, you cannot deduct your contributions on your tax return.
What is the best thing to do with your TSP when you retire?
Make a single withdraw / transfer the TSP to an IRA
Many people in retirement elect to withdrawal the entire amount and transfer the TSP to an IRA. This is typically the best option for folks simply because it gives you greater control.
Why is TSP bad?
Unlike a CSRS or FERS annuity, the TSP is under the category of a defined contribution plan. As such, the TSP does not guarantee lifetime income once a federal retiree starts withdrawing from the TSP. In fact, a TSP account could be depleted before the TSP participant dies.
How does TSP work when you retire?
You can get a fixed dollar amount from your TSP each month in retirement. The money is taken out of your TSP retirement account, and the withdrawals will continue as long as your money lasts.
Is TSP considered a pension?
Similar to 401k plans in the private sector, the TSP isn’t a pension plan. If you work in the public sector for a state, city or non-federal agency, you probably receive a pension plan. … Although some private companies provide pensions, most now offer 401ks.
When can I withdraw from my Thrift Savings Plan without penalty?
If you want to avoid paying taxes on the money in your TSP account for as long as possible, do not to take any withdrawals until the IRS requires you to do so. By law, you are required to take required minimum distributions (RMDs) beginning the year you turn 72.