Definition
The retirement plan for federal employees and uniformed service members, working like a 401(k): payroll contributions, traditional or Roth treatment, and a small menu of extremely low-cost index funds. Most participants also receive automatic and matching agency contributions.
Why it matters
The TSP's fund expenses are among the lowest anywhere, a few hundredths of a percent, so more of every contribution compounds. Leaving the match on the table or ignoring the plan wastes one of the best retirement deals in the country.
Example
A federal employee earning $70,000 contributes 5% of pay, $3,500 a year, and agency automatic and matching contributions add roughly the same again. About $7,000 a year goes in at index-fund costs so low the fee line barely registers.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.