The Thrift Savings Plan (TSP), the U.S. government’s 401(k)-type retirement plan for federal workers, is the world’s largest defined-contribution retirement plan, with approximately six million participants and nearly $770 billion in assets. Participation is open to active employees of the Federal Employees Retirement System (FERS), the Civil Service Retirement System (CSRS), the uniformed services, and certain other categories of civilian government service.

The program offers a number of valuable benefits, especially for FERS employees. First, Uncle Sam makes an automatic contribution equal to 1% of the employee’s salary each pay period. There is no waiting period and the employee doesn’t have to be making any contributions of his or her own. (There is a two- to three-year vesting period, depending on the type of work the employee does.)

In addition, the government matches dollar-for-dollar any contributions an employee makes, up to 3% of salary. And the government contributes 50 cents per dollar for the next 2% of salary after that.

Automated decisions for newer hires

If you’re covered under FERS, a great goal is to invest at least 5% of your salary. That will enable you to take full advantage of the matching money offers. In the past, those hired between August 2010 and September 2020 were automatically enrolled at 3% of gross pay going into one of the plan’s age-based Lifecycle Funds (an employee can opt out of participating or choose different funds). Now, all new TSP-eligible employees are automatically enrolled with 5% of their gross pay going into the TSP. While 3-5% is a good start, that amount is unlikely to be enough to meet your retirement savings goals, so make sure you’re investing enough either by contributing more to the TSP or an IRA.

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