TSP Meaning

The plan was introduced under the Federal Employees Retirement System Act where the workers of medium-sized US firms get an opportunity to make retirement investments like the   401(k) plan.

The contribution to Thrift Saving Plan (TSP) can be made through a paycheck or one can make payment through alternative funds.

The plan was created to offer income tax benefits, and in the traditional method, one had to pay duties when they withdrew from the account. Still, later Roth contributions system was adopted where one pays before the money goes into the TSP. 

In 2018, the income investor contribution made to the account was limited by the government to $18,500 where one can take benefits of the contribution limit and pay an additional $6000 per annum. 

However, the employee should remember that of all the plans it may provide one of the most miniature sources of federal employee retirement income and may not serve as a standalone retirement plan.

TSP purchases annuities for retirees from private insurance companies and in such cases, if the basis of valuation is fixed income, they may receive 6.5% of the balance, which means, one gets $6500(in a year) for a deposit of $100,000.