TSP 101: Thrift Savings Plan EXPLAINED in 15min | What you need to know about Benefits & Investing
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- čas přidán 30. 07. 2024
- This video explains all you need to know about the Thrift Savings Plan (the TSP). It's a TSP 101 for those who want to better understand the TSP. I’ll answer these 3 main questions: (1) What do I need to know about the TSP? (2) What are the benefits of the TSP? & (3) What are my TSP investment options?
BONUS
At the end, I’ll share an AWESOME tool made by the TSP that will help you narrow down which funds to invest in.
//TOPICS
00:00 Intro
01:40 What is the TSP?
02:15 What is the difference between the Traditional TSP and Roth TSP?
02:50 Should I contribute into the Traditional or Roth TSP?
04:12 What are the benefits of the TSP?
06:34 What are my TSP investment options?
// MORE TSP RELATED VIDEOS
How to invest in the TSP (2021 Strategies): • How to Invest in the TSP
The 8 Financial Secrets of Working in Congress - • Working in Congress | ...
// SAY HI
Add me on Instagram: @Melissa_Dargan
Twitter: @Melissa_Dargan
// BUY THE EQUIPMENT
Mic 🎤 : amzn.to/3lom59K
// LINKS MENTIONED IN THE VIDEO
TSP Funds - www.tsp.gov/funds-individual/
TSP Investment Fund Calculator - www.tsp.gov/how-to-invest/bef...
//ATTRIBUTION
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//CONTACT
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// CONTENT
What do I need to know about the TSP?
The TSP is the federal government’s retirement plan. It is like a 401(k) plan but is open only to federal employees. It basically provides you an opportunity to save money for retirement that is in addition to any pension and social security payments.
The TSP also has Traditional & Roth options. The Traditional TSP is tax-deferred. This means you make contributions to the TSP using pre-tax dollars, and pay taxes on your savings when you withdraw funds from the TSP at retirement. The other is a Roth TSP option, where you contribute using your post-tax dollars. This way, you won’t need to pay taxes on your investments when you withdraw.
Should I put my contributions into the Traditional or Roth TSP?
Both TSPs operate primarily the same way. The main difference is the timing of your taxes.
What I chose:
When I was an entry level staffer in Congress earning $28K, I figured my tax bracket was the lowest it was going to be (I mean, I assumed I’d be earning more down the road, right? Additionally I believed that I will need more to live off of during retirement since my retirement dream is to travel), so I chose to have my TSP contributions go into the Roth option.
*** Keep in mind that the amount matched by your employer (up to 5% in Congress) automatically gets put into a traditional account. So you will pay taxes on that later.
What are the benefits of the TSP?
+ A HUGE TSP BENEFIT is contribution matching. This is basically FREE MONEY!
+ Another benefit is Low Fees. The TSP has Low Administrative Costs (known as the Expense ratio) when compared to other retirement options. Why does this cost matter? Because over time, especially with large investments, administrative fees can eat into your investment big time.
What are my TSP investment options?
The TSP offers certain pre-packaged investment options. There are 6 parts. The quick overview of the 6 parts are:
(1) Government Securities Investment Fund - “G” Fund
(2) Fixed Income Index Investment Fund - “F”
(3) Common Stock Index Investment Fund - C
(4) Small Cap Index Investment Fund - S
(5) International Stock Index Investment Fund - I
(6) Lifecycle Funds - L
Bottom Line
Hoped this video helped provide the information and tools needed to better understand the Thrift Savings Plan (TSP). Ultimately, it's up to you to make the decision of what you invest in within the TSP investment. Good luck and may the investment force be with you!
//DISCLAIMER
The content on my CZcams videos and other social media platforms is for educational purposes only and is based on my personal opinion. It's not meant to be investment or professional financial advice. I am not a financial advisor, certified accountant or a tax professional. You should do your own research and speak to a licensed professional for financial or tax decisions if necessary. Remember that investments involve some form of risk and there is no guarantee that you will be successful in making, saving or investing money; nor is there any guarantee that you won't experience any loss when investing.
Also, links included in this description might be affiliate links. If you purchase a product or service with the links that I provide I may receive a small commission. There is no additional charge to you! Thank you for supporting my channel so I can continue to provide you with free content each week!
#ThriftSavingsPlan #TSP #Retirement #RetireRich #GovernmentEmployee
Let me know if you'd be interested in a video on TSP mistakes to avoid!
Melissa thank you and yes!
Yes 🙌
Yes. Thanks
Yes. Please do. Helpful information! Thank you.
The key of not being poor is the ability to save no matter the amount of money you save.
Yes you are right why I hardly get broke is that I do save little money from my income and I don't spend unnecessarily.
Do you know that you can also save money and also earn money through cryptocurrency
@@leograyso171 yes you're right now bitcoin has raised to 55k I believe it will raise before the end of the month
@Andrew Stephens Bitcoin has made so many people a millionaire
@Abdellah adam as a beginner I will advise you to work with Susan Ann Kira, for good and huge withdrawals.
I appreciate being educated on this. Your breakdowns are easy to understand... I enjoyed that
Appreciate it! Thanks for watching it 👍🏼
I got to travel courtesy of the Army (Saigon, Bangkok, Manila, Paris, London, Rome, Monte Carlo, etc). Lifecycle funds are okay (and reflect some of the ideas of the 1990 Nobel winners in economics), but may not have enough equity exposure in retirement. Some of the initial lifecycle concepts, such as those from Vanguard, had just 20 percent stock exposure for retirees but were gradually adjusted upward as critiques of early lifecycle plans began to roll in.
Really great video, thank you!
Thanks and glad you found it helpful!
This was excellent video. 🤗🤗🤗🤗
Great video
Thanks! Hope it helps explain the TSP and get you good returns on your retirement investments $$$
Thank you so much for this info! Started with the govt 5 years ago and have no idea how tsp works. I do have a good chuck of money in there, but I want to start playing with it so I don’t have to live off dog food when I retire lol
Glad you are saving for retirement and definitely good to check how you allocated the investments!
I just started and I’m just trying to understand the tsp
@@ChannieChauni Well it's good that you're researching now. When I started, it didn't even occur to me to look on CZcams to learn about TSP
Great information. 13 years in the DOD and nobody educated me
Happy to help! Wow, 13 years and no TSP education. I wish the government did a better job with financial literacy and personal finance education.
@@MelissaDargan yes thank you. Last night I moved what I had into S & C funds and hopefully you’ll educate me more as time goes on. 24 years to go Lord willing to retirement.
With my previous employer after my 401k would reach $19,500 and catch up of $6500 on a PRETAX basis the plan would switch to an after tax contribution. The limits for the 401k which included the before, after and company contribution was ~$53,000 as set forth in the IRS guidelines.
Question,
Now that I am employed with the government and have the TSP program, I can't get a straight answer as to whether I can continue to contribute on an AFTER TAX basis by switching over to the ROTH once that I have reached the ($19,500 +$6500 limits on a pretax basis) so that I can shoot for the $53,000.
Thank you
That is frustrating that you are unable to get a straight answer from your HR or employer.
When I was on Capitol Hill, I chose to save in the TSP Roth option and my matching was put into the traditional account. I never hit my max $17,500 (at the time), so for questions about non-government retirement savings, it is best to speak with a professional tax advisor/ expert. They should be able to answer your question. It can get complex after the limits.
Your previous employer used an "After-Tax 401(k)" account to allow for the extra contribution. This is *different* than a Roth 401(k). So there are three flavors of 401(k) - Traditional 401(k) (tax deductible now; taxed on withdrawal), Roth 401(k) (contributions taxed now; all withdrawals tax free) and 'After-Tax' 401(k) (contributions taxed now; withdrawal of earnings taxed later) (you can google for more detailed information). The Federal Gov't TSP has a Traditional option and a Roth option, but, unfortunately does not have an "After-Tax" option. Thus, you are limited to the standard cap ($19500) + any catchup you are eligible for within the TSP. However, you can still make a non-deductible $6000 contribution to a traditional IRA (and possibly do a backdoor Roth conversion, but I'd seek a professional's help with that.)
So how much taxes they taking from roth and traditional? The 5% matching is pretty much paying ur tax? Sorry im trying to learn tsp. I think my aunt told me something before she pass away about tsp. But i could recall she wish she withraw her tsp before when they offer her because i think they taxed her large amount. If you withold ur tsp and does not withraw it on time you will pay big amount?
Good questions. With respect to how much taxes you pay - the ROTH option is taxed now so you won’t pay taxes later when you take it out of the TSP. The TRADITIONAL option is tax deferred - meaning it will be taxed when you withdraw it from the TSP.
In case you want to estimate what your current paycheck may look like, here is the tsp paycheck estimator: www.tsp.gov/calculators/paycheck-estimator/#top
Remember, if you get the 5% matching amount, it will continue to grow and compound through the years. The taxes for your money in the TRADITIONAL account will depend on your income for the year that you withdraw the money. Once you retire, any money in the ROTH account will be tax free.
If you hold your TSP and don’t make withdrawals, the TSP will automatically start distributions at 72 - here is more info: www.tsp.gov/living-in-retirement/before-you-withdraw/
As I am just sharing what I know from personal experience, you may also want to call the TSP with specific questions related to your account. TSP professionals can be reached at: www.tsp.gov/contact/
Hope this helps!
Hi, can you show step by step how to do the investments in the S and C ? I have all in the G and I want to put it 50% C and 50% S
You can log on to the the TSP website to do an interfund transfer for the balance in your account. For future contributions you can also change how yours funds are allocated. There is a thrift savings phone number you can call for further assistance.
Hi! I’ll add this for a future TSP video 👍🏼
Wish I had the choice of the ROTH when I started, by the time it was offered it didn't make sense (for me)
When I first started they didn’t have ROTH either! It wasn’t until my 2nd-3rd year working in Congress that ROTH was introduced. Crazy how long it took the TSP to offer it.
Just a FYI - before one can compare a Roth to Regular TSP you must know EXACTLY how the state you work in now taxes the pension of a federal civil servant. Approx. 9 states that normally have income taxes (e.g. NY and PA) consider the TSP "part of" their civil servants pension and DO NOT tax it on withdrawal in retirement. This is significant because if you work in one of these states (and assuming you will retire there) and contribute to the regular TSP - you can escape state taxes altogether (which are not insignificant in states like NY) by contributing to the regular TSP. As unbelievable as it seems the money is not state taxed going into the regular TSP AND it is not state taxed when withdrawn as it is considered "part of" the civil servants pension in these states. However - if you contribute to the Roth TSP - you will pay state taxes on the money going in. Everything else being equal- you are actually losing money by contributing to the Roth TSP instead of the regular TSP in these states.
C & S all the way. 😆
For 2020, C&S has great return rates! C = 31.45% and S = 27.97% www.tsp.gov/funds-individual/. As they say, no risk, no reward!
@@MelissaDargan So very true. Since FR started unlimited quantitative easing for thr market, it is a good time to invest. However, the market is being propped up, so I am concerned it will collapse soon.
And I
New subscriber. This video is taking some of the fears out of investing. I'm going to be a Career USPS worker in September. I'm in my early 50's.
Would you say the L fund is a good start? Because I don't have any previous savings/investments, I'm thinking I won't get to retire until I'm 70.
Which "L" fund are you considering? Endeavor to contribute at much as you income as budget allows up to $27,000 year.
Hi Melissa
Would u suggest C funds or L funds
Plan to retire on 2045. Also U said at the beginning TSP won’t let u choose to pick
I’m new fed employee. Please advise.
Hey! For me, I'm more proactive and I like to invest in the individual funds. Here is how I invest in the TSP: czcams.com/video/PR1GntXAShg/video.html
Please note that currently, 2022 has a lot of market instability given the US economy, inflation and the ongoing international issues. My decision to invest in the individuals funds is a long term strategy. So while this year's ROI has yielded a negative return because of a drop in the market, I plan to keep my money in the individual funds with the hope that the market will bounce back eventually (as it has historically).
@ *Thomas* are you contributing at least 5% of income to TSP?
@@MelissaDargan Thanks Melissa. Love to see more videos.
The entire federal government receives 5% matching, not just those tied to congress.
Thank you for sharing and that is helpful to know 👍🏼. Hoping people working for the federal government take advantage of the 5% match!
@@MelissaDargan most of us do 😊
@@MelissaDargan you mention the 5% match and the government would also throw in $5K. I thought the 5% matching is only 5% of what YOU put in? Example: I put in $5k and the government 5% matching of that would be $250. So the 5% is based off your salary?
I am currently putting 100% into the C-Fund. Would you recommend that I should leave it where it is? Move it to an 80/20 to mirror the total stock market, or a 50/50 split? Thanks.
Hey Derek! Great question. The answer depends on a few factors (ex: how many years do you have to go until retirement? What is your risk tolerance? etc). Individuals who are further away from retirement like to invest in the C and/or S funds because although there may be market dips, the long-term investment allows investors to recover any losses and overall gain more than if they were invested in other TSP funds. That said, here is my other video where I share my TSP portfolio and the breakdown of how I invest: czcams.com/video/PR1GntXAShg/video.html. It should help explain my thinking when it comes to thinking about how much to put in the C fund.
PS: I have friends who do 100% C fund and friends who like mixing it up with C&S funds. It ultimately comes down to your preference on risk and the length of time you have to invest. Good news is that you've chosen one of the top performing TSP funds, so that is a great start!
@@MelissaDargan so would you say that incorporating the S Fund would be taking on more risk. Even though they both preform almost the same over time? I did see the rate of return is higher on the website and that the TSP marks the S Fund as medium/high risk & the C Fund as medium risk. But, if I did change my contributions I would probably do 80/20 to try and replicate the Total Stock Market. Just wondering if I am gaining anything by switch. What would you recommend for contribution percentages between the two funds? Or is it best to pick one? Any recommendations would be appreciated.
@@mrderek800 An all equity (stock) portfolio of C Fund and or S Fund is an aggressive asset allocation. It is likely far more important that you contribute as much as your income and budget allows and endeavor to reach $19,500 as soon as possible.
@@alrocky I don't understand what you are trying to say? I'm 26, so I am looking for it to be aggressive. I have considered putting it back into a Life cycle fund, or to have future investments in that, but I'm not sure since I am still learning. But, even if I did contribute the max amount the portfolio would still be aggressive.
@@mrderek800 An all stock (no bonds F/G) portfolio which you currently employing is very aggressive. Another way to be aggressive to is contribute as much as you can with an aim to reach $19,500 as soon as possible. An all stock portfolio is not for the timid as those with little experience with a market correction or bear market can easily panic and sell when they see their TSP balance tumble. It's better to have some bonds (F/G) and or contribute more income into your TSP account. There is no ideal or perfect Asset Allocation so 80/20 C/S or similar AA or 75/15/10 C/S/G or Life Cycle 20XX fund is acceptable - so the next step is to contribute as much as you can.
I just started working for the government. I'm trying to save money for a downpayment for a house ( I live in northern VA and houses are expensive). Would you recommend I invest 5% in each TSP and ROTH TSP or would you recommend I invest 8% in TSP and 2% in ROTH TSP?
Not sure what the minimum % you would have to do in the TSP to get the match, but at least do that. Put money away for the house. Set up rainy day fund. Set up separate ROTH.
@@evilload The agency matches 5% in the TSP. Is it best to invest more in the TSP or more in the ROTH?
@@MaryA-cl7ls If i read your OP correctly you just started with the government (GS level) and are probably income limited when it comes to retirement savings. There is really no clear answer but as long as you are putting away as much as you can (either account) that's a great start. Remember, retirement saving is a marathon, not a sprint. Sometimes you have to adjust your contributions when you are able to and accept the risk levels of each type of TSP funds. You could easily do 5% each (to maximize TSP contribution) and additional to ROTH when you get increases in pay.
Hi Mary! Quick clarification, are you hoping to save a total of 10% into the TSP?
The reason I ask is because the government offers a 5% match. Thus you have the option to put 5% in a Roth or Traditional TSP and the government would put its 5% match into the traditional TSP (IMP: the government contribution is by default put into a traditional TSP).
Since you are saving for a downpayment for a house, the 5% match is HUGE because this enables you to only need to save 5%, and with the match you effectively save 10% towards retirement. Then any extra money you were thinking of putting away in retirement can go into saving for a downpayment which you need more immediately.
When considering the Traditional TSP vs the Roth TSP, the question is when you retire do you think you will be in a higher or lower tax bracket?
To help, I'll share my example. When I was an entry level staffer in Congress earning $28K, I figured my tax bracket was the lowest it was going to be (I assumed I’d be earning more down the road. Additionally I believed that I will need more to live off of during retirement), so I chose to have more of my TSP contributions go into the Roth option. This way I already paid taxes on the amount I will withdraw from the ROTH TSP account in the future.
Now if you are earning $160K, you may want to think about a Traditional TSP contribution to reduce your tax liability now as you may not need to be living off that much in retirement later.
Does how much I contribute affect how much I take home each paycheck?
Yup! The more you save in the TSP, the less you take home each paycheck. Also, another factor is whether you put into Roth or Traditional.
This is such a good question, I’ll add it onto the list of tsp videos I have planned. In the interim, here is a calculator to help you estimate how much will be taken out of your paycheck based on how much you put in: www.tsp.gov/calculators/contribution-comparison-calculator/#top
@@MelissaDargan Thank you very much!
Is it a good idea to convert my TSP into an annuity once I retire from the military? The TSP offers one....
Good question! Let me do some more research and will follow-up 👍🏼
@@MelissaDargan NOOOOOOOOOO!
The TSP Annuity is trash. You can manage your own money better yourself...and you even get to pass your remaining funds to your heirs when you die.
Hi Godwin, after reading more about it, for me I don't like the annuity option. The #1 reason why is because I would lose flexibility to control when I want to take out money from the TSP retirement account.
The annuity options do set up monthly payments, but that can be limiting if you want to access more retirement funds earlier. For many federal employees, the TSP makes up a large share of their retirement. By choosing the TSP annuity, you would forego access to that lump sum for the rest of your life. In my personal opinion, it is not a good idea to lose access to that retirement cash.
This is just my take on it. Please note I am not a TSP advisor or professional. To me, I like the idea of managing my own money and controlling when and how much I can take out.
@luna - Thank you for sharing your thoughts and after looking more into annuities, I agree with you. It is not something I would choose.
Hi Melissa. How should I invest my funds in 2024. I’m 44 I’ve shuffled a lot my previous years. I still got like 20 years to work. Currently I’m 50% c fund 30 % s fund and 20% l2040 fund Does this look solid to you?? Should I contribute to the I fund ??
Being a single parent I stupidly didn’t contribute to my tsp for 8 years, I’m 4 yrs from retirement with very little in my account. What can I do to catch up?
Contribute $19,500 a year plus additional $6,500 catch up a year.
@@alrocky I love in so cal not possible
Hi Maria! Thank you for sharing. Being raised by a single parent myself, I understand how tight financial budgets can be. It is great that you are looking at your options and trying to make the best financial decision for you moving forward.
If you are nearing retirement, as @Al Rocky mentioned, the TSP does have the option to max out contributions (at $19,500 as of 2021) plus add a 'catch-up amount' (at $6,500 as of 2021).
I do see that you mentioned that living in SoCal affects the ability to contribute the max amount, so to take advantage of the financial benefits offered, be sure to at least put in the amount that your employer will match. For some TSP account holders, it may be a 5% match like those employees who work on Capitol Hill. I'd check with your HR what the retirement benefits are and match that to ensure you are getting the money offered by the empolyer - what I call "free money."
Since you still have 4 years until retirement the “free money match” still goes a long way and effectively doubled your contributions. Be sure to save what you can. Anything is better than nothing and the TSP option is a great way to build retirement savings if you work for the government.
Hope this helps!
Can I transfer my traditional to a roth?
Good question! To clarify, are you asking about a transfer from a Traditional TSP to a Roth TSP?
If yes, at this time, the TSP does not allow ROTH Conversions within the plan.TSP users cannot directly transfer Traditional Pre-Tax contributions in the TSP to a ROTH After-Tax TSP.
@@MelissaDargan so what happens to that money? Because I changed the amount I contribute to my traditional to Roth tsp on my postal website...
From my understanding, changing the contribution affects money contributed moving forward. So if you changed your contributions to now go into TSP ROTH, money put into the TSP moving forward (since the time you changed the contribution) will go into TSP ROTH. The money that is already in the TSP Traditional will remain in the TSP Traditional account.
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Why invest in the TSP when you can just dump your entire investable assets into TESLA STOCK?!?!?
Definitely a good question! Very risky, but you are the best to make your own decisions. Check out Al’s comment below too. He makes a good point about taking advantage of the 5% match with the TSP so you don’t lose out on free money!
Q1 Because it's foolish to forgo the 5% federal match and tax deferred investment in a TSP or 401(k) account.
@@alrocky 100% agree with you. The 5% match is basically free money! After maxing out on TSP retirement limits, then looking at alternative options (individual stocks or other diversified investments like index funds may be considerations).
What a stupid question
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