 |
|
       |
Thrift Savings Plans TSP (Thrift Savings Plans) The Thrift Savings Plan (TSP) is a tax deferred retirement savings and investment plan for Federal employees. It offers Federal employees the same type of savings and tax benefits that many private employers offer through their 401 (k) plans. Both employees covered by the Federal Employees Retirement System (FERS) and the Civil Service Retirement System (CSRS) may participate in the TSP, however, participation rules differ between the groups. The contributions that you make to your TSP account are voluntary and are separate from your contributions to your FERS Basic Annuity or CSRS annuity.
Ø It sure is a good deal while you are on active duty because of the deferred tax savings. Ø The TSP has some restricted investment alternatives that force you to be very proactive, continually, in your investment profile. Ø What if the economic frontier changes before your investment goals are met? Ø The TSP may be a great way to save, but is it the best way for me to distribute my own money back to me over my lifetime? Ø What should I do with my TSP when I separate or retire from active duty? Ø Can I move it to have more control and better alternatives? Ø Can you roll over money from the TSP to an IRA?
What is the Thrift Savings Plan?
The TSP is a defined contribution plan. The retirement income that you receive from your TSP account will depend on how much you (and your agency, if you are a FERS employee) have contributed to your account during your working years and the earnings on those contributions. In contrast to the TSP, the FERS Basic Annuity and the CSRS annuity are defined benefit programs. This means that the benefits you receive from your FERS or CSRS annuity are based on your years of service and your salary, rather than on the amount of your contributions and earnings. Most contributions to these annuity programs are made by your agency on your behalf. Your contributions are mandatory and the amount you contribute is defined by law. Your contributions are made by payroll deductions that your agency takes automatically from your paycheck. On the other hand, your TSP contributions are voluntary, and in an amount you choose. Your TSP benefits are in addition to your FERS or CSRS annuity. If you are a FERS employee, the TSP is an integral part of your retirement package, along with your FERS Basic Annuity and Social Security. If you are a CSRS employee, the TSP is a supplement to your CSRS annuity.
In general, you can keep your money in an employer's plan until you reach the plan's normal retirement age (typically age 65). Or, as a federal employee with a TSP, you can do an in-service withdrawals for financial hardship or after you reach age 59 ½ . Also, if you terminate employment before then, should you keep your money in the plan or instead make a direct rollover to an IRA? If you want more information on in-service withdrawls.
There are several reasons to consider making a rollover. In contrast to an employer plan, where your investment options are limited to those selected by your employer, the universe of IRA investments is almost unlimited. Similarly, the distribution options in an IRA (especially for your beneficiary following your death) may be more flexible than the options available in your employer's plan.
On the other hand, your employer's plan may offer better protection from your creditors. In general, federal law protects your total IRA assets up to $1,000,000 if you declare bankruptcy. (The laws in your state may provide additional protection.) In contrast, protection from your creditors in an employer retirement plan is generally unlimited.
Features of the Thrift Savings Plan FERS Participants — You can contribute up to 11 percent of your basic pay each pay period to your TSP account as soon as you become a Federal employee. Then, once you are eligible, you receive the following important benefits: Ø Agency Automatic (1%) Contributions Ø Agency Matching Contributions Ø Immediate vesting in Agency Matching Contributions and vesting — generally in 3 years — in Agency Automatic (1%) Contributions
CSRS Participants — You can contribute up to 6 percent of your basic pay each pay period to your TSP account. You do not receive any agency contributions.
All Participants — The TSP offers the following: Ø Immediate employee contributions Ø Before-tax savings and tax-deferred investment earnings Ø Low administrative and investment expenses Ø A choice of five investment funds:
– Government
Securities Investment
(G) Fund Ø Loans from your own contributions and attributable earnings while you are in Federal service Ø In-service withdrawals for financial hardship or after you reach age 59 ½ Ø Portable benefits and a choice of withdrawal options after you separate from Federal service Ø Protection of spouses' rights for loans and withdrawals Ø A Web site with general account information, capability for requesting interfund transfers and contribution allocations, up-to-date TSP materials and information, and calculators to estimate account growth and annuity amounts Ø An automated telephone service (the ThriftLine) for account information and certain transactions |
|
Copyright © 2006 The Consultants Web Design By: J & J Technology Solutions |
|