What is the TSP? A Full Guide for Military Families

What is the Thrift Savings Plan?

The Thrift Savings Plan (TSP) is a component of the military Blended Retirement System (BRS). It is a tax-advantaged retirement savings and investment program similar to a corporate 401(k) and is uniquely available to U.S. military members and federal employees.

How does the TSP work?

All new military members are automatically enrolled in the TSP after 60 days of service. Your contributions are initially set at a rate of 5% and are automatically deducted from your basic pay. You can change the percentage you contribute at any time. The Department of Defense (DOD) begins contributing 1% regardless of whether you are contributing or not, and after 2 years of service, the DOD will match the first 3% you contribute dollar for dollar and the next 2% you contribute 50 cents on the dollar.

TSP Investment Options

The TSP offers five individual funds and ten Lifecycle (L) Funds, each of which is comprised of a mix of individual funds. Every service member has access to the same lineup. You can change your fund allocations at any time with no fees or penalties.

If you don’t want to specify your investments, the TSP has a built-in autopilot option: for all new service members, money is automatically invested in the L Fund that matches your age. These funds start aggressive when you’re young, gradually shift toward more conservative allocations as you approach retirement, rebalance automatically,  and require zero maintenance. It’s the TSP’s version of “set it and forget it.”

Here's a brief description of each of the five individual funds:

Lifecycle (L) Funds

While the five core TSP funds let you build your own investment mix, many service members prefer a simpler, hands‑off approach. That’s where the Lifecycle (L) Funds – professionally managed, age‑based portfolios that automatically adjust over time – come in.

The TSP offers ten different L Funds, each based on a target retirement year (L 2025, L 2030, L 2035, etc.) You simply choose the fund whose date comes closest to matching your anticipated full retirement date, and its allocation is automatically adjusted to be more conservative (less in stock funds and more in fixed-income funds) as you draw closer to your target date.

Traditional TSP vs Roth: Which is better for military families?

When you contribute to the TSP, you have two tax options: Traditional and Roth.

With the Traditional TSP, you contribute pre‑tax dollars, reducing your taxable income and lowering your tax bill (or increasing your refund) for the year. You will, however, have to pay ordinary income taxes on any previously untaxed dollars when you begin withdrawing your money in retirement. With the Roth TSP, you contribute after-tax dollars, so there is no immediate tax benefit. However, your qualified withdrawals in retirement are completely tax‑free.

For many military families, the Roth TSP is a good fit because service members tend to start their careers in lower tax brackets, have a long span of years for their money to grow tax-free before they reach retirement age, and may receive tax-free combat-zone pay which can effectively remain tax-free forever (including earnings). The traditional TSP may be worth considering for higher-income households who anticipate being in a lower tax bracket in retirement and are seeking to reduce their tax bill now. A financial advisor can help you determine how to allocate your TSP contributions based on your specific goals.

2026 TSP Contribution limits and other changes

Contribution limits are the maximum amounts the IRS allows service members to put into the Thrift Savings Plan each year, and they are the same whether you contribute to a traditional TSP account, Roth TSP account, or a combination of the two. All of these amounts have been updated for 2026.

Elective Deferral Limit: $24,500 — this is the maximum you can contribute across Traditional and Roth TSP. If you are deployed to a combat zone, you can contribute more than $24,500, but the pay must go into a traditional account.

Annual Additions Limit: $72,000 — this includes all contributions (your contributions, matching, automatic 1%, and tax‑exempt combat‑zone contributions).

Catch‑Up Contributions (Age 50+):

• $8,000 for participants ages 50–59 and 64+
• $11,250 for participants ages 60–63

High-income earners, defined as anyone making over $150,000 in Medicare wages, must make their catch-up contributions to a Roth TSP account.

Because every family’s situation is different, service members should carefully review all factors — including current tax bracket, deployment status, and long‑term financial goals — before choosing between Roth and Traditional TSP accounts.

For personalized guidance, consider getting started with a First Command Financial Advisor. 

Frequently Asked Questions (FAQs):

What happens to my TSP if I leave the military?

Your TSP stays with you — you can keep it, roll it into a civilian employer’s 401(k), or move it to an Individual Retirement Account (IRA). You don’t lose matching contributions you’ve already earned.

Can I take money out of my TSP while still serving?

Yes, but only under specific circumstances such as financial hardship or age‑based in‑service withdrawals (age 59½+). These withdrawals may be subject to federal and possibly state income taxes, as well as a 10% early withdrawal penalty if you are under age 59 ½ .

Does the TSP charge fees?

There are management fees associated with the TSP investment funds, but they’re among the lowest of any retirement plan available. Fees vary slightly by fund but are typically less than 50 cents per year for every $1,000 invested.

Can I contribute bonuses, special pay, or incentive pay to my TSP?

Yes — most types of military pay can be contributed to TSP, including special and incentive pays. If you’re in a combat zone, those contributions may also be tax‑exempt.

TSP funds have very low administrative and investment expenses and, low expenses can have a positive effect on the rate of return of your investment. Prior to requesting a rollover from your Thrift Savings Plan (TSP) account to an Individual Retirement Account (IRA), you should consider whether the rollover is suitable for you. There may be important differences in features, costs, services, withdrawal options and other important aspects between your TSP account and IRA.

First Command and its affiliates do not provide legal or tax advice. This material is for informational purposes only and should not be relied on for legal or tax advice. You should consult your own legal or tax advisors before engaging in any transaction.