Pay and Benefits Watch: Common TSP questions

Often we don't know what we don't know. That's certainly true of the Thrift Savings Plan, the investment program in which federal employees' retirement nest eggs are incubating. But the decisions you make on your TSP investments will have repercussions on your financial well-being for the rest of your life, so it's a good idea to have a working knowledge of how the TSP works.

Here are some tidbits about the TSP, arranged in question-and-answer format. These questions were sent in by Pay and Benefits Watch readers.

Who runs the TSP?

The TSP is managed by the Federal Retirement Thrift Investment Board, an independent agency. The board has five presidentially appointed members and an executive director, who are charged with managing the TSP "prudently and solely in the interest of participants and their beneficiaries," according to the board. The Agriculture Department's National Finance Center in New Orleans runs the computer systems that hold federal employees' TSP records.

How much money is invested in the TSP?

Back in January 1998 when Government Executive's cover article, "Nest Egg", told the story of the TSP, we reported that $55 billion of federal employees' money was invested in the program. As of August 1999, there was $85.6 billion invested in the TSP.

Which funds do people invest in?

The TSP has three funds in which federal employees can invest their money: the C Fund (common stocks), the F Fund (fixed-income bonds) and the G Fund (government securities). Of the $85.6 billion currently residing in the TSP, $51.7 billion is in the C Fund, $4 billion is in the F Fund and $30.1 billion is in the G Fund. About 12 percent of TSP participants only invest in the G Fund. Most people, however, have diversified their investments.

The average investor who makes more than $70,000 a year invests 37 percent of their TSP money in the G Fund, 57 percent in the C Fund and 6 percent in the F Fund, according to 1997 data. By age, the youngest federal employees put 40 percent in the G Fund, 54 percent in the C Fund and 6 percent in the F Fund, while the oldest federal employees put 64 percent in the G Fund, 32 percent in the C Fund and 4 percent in the F Fund.

On average, what percentage of their salaries do federal employees invest in the TSP?

Employees in the Federal Employees Retirement System can invest up to 10 percent of their salaries in the TSP, up to a $10,000 limit. Civil Service Retirement System employees can invest up to 5 percent of their salaries, also with a $10,000 limit.

The average FERS employee invests 6.8 percent of his or her annual salary in the TSP, according to 1997 data. The average CSRS employee invests 4.4 percent of his or her annual salary in the TSP.

How are the annual limits on TSP investments determined?

The FERS 10 percent and CSRS 5 percent limits were set in the law that established the TSP in 1986. The IRS sets the $10,000 overall limit because TSP contributions are tax-deferred. In November each year, the IRS announces the limit on so-called "elective deferrals," which has been the same for the past two years. In 1997, the limit was $9,500.

In the table showing how much the various TSP funds are returning on employees' investments, if you add up the return rates for each month in a 12-month period, they don't add up to the annual return rate shown. Why is that?

In one word, the answer is compounding. The TSP board has provided the following three-step method for calculating the return rates for any period:

  1. Convert percentages to decimals (move the decimal point 2 places to the left) and add 1. You must add "1" to the returns and multiply the resulting factors together to include the effect of monthly compounding. If you just add the returns together, you ignore the effect of compounding.

    January 6.22% = .0622 + 1 = 1.0622
    February .79% = .0079 + 1 = 1.0079
    March (4.13%) = -.0413 + 1 = .9587
    April 6.00% = .0600 + 1 = 1.0600
    May 6.07% = .0607 + 1 = 1.0607
    June 4.45% = .0445 + 1 = 1.0445
    July 7.94% = .0794 + 1 = 1.0794
    August (5.59%) = -.0559 + 1 = .9441
    September 5.46% = .0546 + 1 = 1.0546
    October (3.38%) = -.0338 + 1 = .9662
    November 4.61% = .0461 + 1 = 1.0461
    December 1.71% = .0171 + 1 = 1.0171

  2. Multiply the factors together:
    1.0622 x 1.0079 x .9587 x 1.0600 x 1.0607 x 1.0445 x 1.0794 x .9441 x 1.0546 x .9662 x 1.0461 x 1.0171 = 1.3317
  3. Subtract 1 and multiply by 100 to convert the product to a percentage:
    (1.3317 - 1) x 100 = .3317 x 100 = 33.17%

    When calculating period returns, the Board uses the actual 8-decimal place returns used in the allocation of earnings, rather than the 2-decimal place returns shown on the Fact Sheet. Therefore, you may get slightly different results due to rounding.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from
We think these reports might interest you:

  • Sponsored by Brocade

    Best of 2016 Federal Forum eBook

    Earlier this summer, Federal and tech industry leaders convened to talk security, machine learning, network modernization, DevOps, and much more at the 2016 Federal Forum. This eBook includes a useful summary highlighting the best content shared at the 2016 Federal Forum to help agencies modernize their network infrastructure.

  • Sponsored by CDW-G

    GBC Flash Poll Series: Merger & Acquisitions

    Download this GBC Flash Poll to learn more about federal perspectives on the impact of industry consolidation.

  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

  • Sponsored by Aquilent

    A DevOps Roadmap for the Federal Government

    This GBC Report discusses how DevOps is steadily gaining traction among some of government's leading IT developers and agencies.

  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

  • Sponsored by CDW-G

    Joint Enterprise Licensing Agreements

    Read this eBook to learn how defense agencies can achieve savings and efficiencies with an Enterprise Software Agreement.

  • Sponsored by Cloudera

    Government Forum Content Library

    Get all the essential resources needed for effective technology strategies in the federal landscape.


When you download a report, your information may be shared with the underwriters of that document.