Avoiding common TSP mistakes

The Thrift Savings Plan (TSP) can be a powerful retirement tool for federal employees, offering tax advantages and low-cost investments. Federal Employees Retirement System (FERS) employees benefit from government matching, but common mistakes can reduce its effectiveness. Here’s how to help avoid pitfalls with your TSP.

1: Missing matching funds

FERS employees get a 1% automatic contribution plus a match up to 5% of salary (dollar-for-dollar on first 3%, 50 cents per dollar on next 2%). Contributing less than 5% leaves free money behind. For a $60,000 salary, 5% ($3,000) yields a $3,000 match, versus $1,800 for 2% ($1,200).¹

2: Mishandling withdrawals

Poor withdrawal planning can trigger penalties (10% before 59?), higher taxes, or depleted savings. A $50,000 lump sum may push you into a higher tax bracket. Missing Required Minimum Distributions (RMDs) after 73 incurs penalties.

3: Ignoring contribution limits

In 2025, the TSP limit is $23,000, with $7,500 catch-up for those 50+ ($30,500 total). Not increasing contributions, especially in high-earning years, can limit savings.

4: Outdated beneficiaries

Missing or outdated beneficiary designations can misdirect funds to an ex-spouse or estate, causing delays/taxes.

Financial Advisor support

A federal benefits advisor can tailor your TSP strategy, optimizing contributions, allocations, and withdrawals while integrating pensions/Social Security. Schedule annual TSP reviews to assess risk tolerance and update plans.

Take action

Look to maximize your TSP by securing the full match, planning withdrawals, increasing contributions, and updating beneficiaries. Small changes today can boost your retirement. Review your TSP account now. For more information visit: Thrift Savings Plan.