Q:

Is a TSP account worthwhile for federal employees?

A:

Quick Answer

Thrift Savings Plan accounts are a worthwhile retirement savings vehicle, reports Kiplinger. This plan charges fees at a much lower rate than private plans do but offers the same tax benefits, notes CNN Money and TSP.gov. For members of the military, Thrift Savings Plan contributions from combat pay are never taxed and earnings on those contributions are only subject to tax upon withdrawal, says TSP.gov. Thrift Savings Plan accounts are available in both traditional and Roth format for federal employees.

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The Thrift Savings Plan charges an expense fee of only 0.03 percent annually as of 2014, while private plans often charge fees in excess of 3 percent, according to CNN Money. Unlike private plans, the Thrift Savings Plan offers low fees by subsidizing its true cost with revenue from loan proceeds and forfeited funds.

Military members can contribute the entirety of their combat pay, up to $53,000 in 2015, to a Thrift Savings Plan account, according to The Military Wallet. The limit on non-combat pay contributions is $18,000. People over the age of 50 can contribute an extra $6,000 of their salary to a Thrift Savings Plan account. In 2015, Federal Employees' Retirement System members automatically receive a 1 percent contribution to their Thrift Savings Plan accounts and then have their contributions matched up to another 4 percent of salary.

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