Thrift Saving Plan — free money!
I was talking to a friend who was eligible to enroll in the Thrift Saving Plan (TSP) which is the federal equivalent to a 401(k) retirement savings plans many companies provide. To my shock, he wasn’t enrolled. When I told him he was leaving free money on the table, it got his attention. So if you are one of the roughly 10% of federal employees that don’t contribute or the additional 20% who don’t contribute at least 5% of your salary, read on.
The TSP is part of the Federal Employee Retirement Systems (FERS) and acts like a tax free savings account. You put your money in before tax, which already saves you money. Earnings on this money are also tax free. The only time you pay tax is when you take the money out, normally when you are in retirement and have a lower tax rate. On top of this, the government matches 100% of your contribution up to 3% of your salary and then matches 50% of your contribution for the next 2%. That means if you contribute 5% of your salary, you get 4% in matching. Uncle Sam also throws in an extra 1% of your salary for free for a grand total of 5% of your salary. Free money, no taxes until many years in the future — if that’s isn’t a deal, what is? If you’re worried about the stability of the plan, you might ask yourself the question: how safe is it to be in the same retirement plan as Congress?
