9158 / What is the thrift savings plan (TSP) option for armed servicemembers?

The thrift savings plan (TSP) is a retirement savings account similar to a 401(k). Members of the armed services can contribute up to the IRS limits of $23,500 in 2025.¹ Servicemembers may make contributions to their TSP accounts using pre- or post-tax dollars. The Roth and traditional TSPs function the same as their 401(k) counterparts. For those enrolled in the Blended Retirement System, their contributions are matched up to 5 percent of their annual salary. For those in the legacy retirement system, there is no matching provision for contributions made to the TSP.

The TSP does not require a servicemember to complete a full retirement to participate and save for retirement. Additionally, the TSP allows participants to choose from a selection of funds that have varying degrees of risk and expected returns on investment. In-service withdrawals are available for TSP participants who meet their program’s requirement. Loans from TSP accounts are also available for servicemembers. The participants may take either a general loan or a loan for the purchase or construction of a residence. Participants may only have one of each loan type open at any given time. The repayment terms are akin to a 401(k) plan with automatic payroll withdrawals and income tax penalty for failure to repay. Distribution rules from the TSP follow those of traditional and Roth 401(k)s or IRAs.

For those participants who opt for a tax-deferred TSP program, they will pay tax upon distribution from the account and for those who opt for the Roth TSP, they receive their distributions tax free after 59½ year of age.² Traditional TSPs cannot be converted directly to Roth TSPs, but in some instances, they can be converted to traditional IRAs and then converted into Roth IRAs. This requires the participant being aged 59½ or separating from the armed services.³