TSP Basics & Scenarios
Your contributions, the agency match, and the compounding that dwarfs them both
This page covers TSP fundamentals: the match, the limits, Traditional vs. Roth, the funds, compound growth, and how the money comes out. It opens with the principle that outweighs everything else: early dollars beat late dollars.
The Compounding Simulator
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This chart plots your TSP growth vs. two hypothetical ATCs identical to each other except for one TSP choice. Pick the lesson:
Controller A maxes out the TSP for his first ten years, then coasts at 5%; Controller B coasts first, then maxes for his last twenty-one. Who retires with more?
Controller A contributes the 5% of basic pay that captures the full agency match; Controller B contributes nothing. How much does skipping really cost?
Both contribute 5%; Controller A also banks one overtime shift a month into the TSP, while Controller B spends it. What does a single banked shift become? (To plot yours: set your contribution to Fixed Percentage, 5 for the base plus about 6 points per banked shift.)
Both controllers start at 5% of basic pay; Controller A adds one percentage point every year, Controller B never does. What is one point a year worth?
Both controllers coast at 5% for decades. At 50, Controller A starts maxing out with catch-up for the final sprint to 56, while Controller B keeps coasting. What do the last six years buy?
Enter your current salary to plot your own path against Controllers A and B.
Future dollars: a balance at 56 won't buy what the same number buys today. To read the chart in today's dollars, lower the TSP Return by expected inflation, roughly 2.5–3%.
Age 25-35: Maxes out the elective deferral ($24,500/yr)
Age 35-56: Drops to 5% contribution
Every year: Contributes 5% of basic pay
Agency adds: The full 5% (1% automatic + 4% match)
Every year: Contributes 5% of basic pay
Plus: One OT shift a month into the TSP ($6,000/yr to start, growing with pay)
Age 25: Starts at 5% of basic pay
Every year: Adds one percentage point, until the IRS cap
Age 25-50: Contributes 5% of basic pay
Age 50-56: Maxes out the annual limit, catch-up included
Age 25-35: Contributes 5% (match only)
Age 35-56: Maxes out the annual limit ($24,500/yr, plus catch-up from 50)
Every year: Contributes nothing
Agency adds: Only the automatic 1%
Every year: Contributes 5% of basic pay
Overtime: Stays in the paycheck
Every year: Contributes 5% of basic pay
Never adds a point
Every year: Contributes 5% of basic pay
Age 50-56: No sprint; 5% to the end
Your schedule: the inputs and contribution mode you set above
Both controllers start at 25 on a $100,000 salary (yours runs on your own numbers). The TSP Return and Salary Growth inputs above apply to all three lines, so the comparison matches your assumptions.
Controller B maxed for 21 years to Controller A's 10, catch-up included, and put in roughly half again as much of his own money, yet at typical returns he still finishes behind. Front-load your first ten years and time does the rest.
Controller A contributes 5% and the agency brings it to 10%; Controller B skips, and gets only the automatic 1%. Ten times the money flowing in means roughly ten times the balance coming out. Whatever else you're saving toward, the 5% comes first.
Same 5% of basic pay, same match; the only difference is one overtime shift a month going into the TSP instead of the checking account. At typical returns, the banked shifts compound into six figures by 56.
Controller A never felt a single jump, and the agency money was identical the whole way; at typical assumptions, the ladder roughly doubles the age-56 balance. Small, consistent increases lead to major differences by retirement.
Same career until 50, then six maxed-out years with catch-up put Controller A six figures ahead at typical raises and returns. Front-loading beats sprinting, but the window never closes while you're still working. The catch-up years are worth using, even from a standing start.
Projection only, not financial advice. Returns are assumed and constant; real markets vary year to year. Figures are nominal (future) dollars unless you enter a real (after-inflation) return. Contribution limits are held at 2026 levels; the IRS raises them most years, so long-horizon max-out savers will likely contribute more, and end with more, in nominal terms.
The chart runs to age 56, mandatory separation. For additional TSP modeling, see the following tools:
- Retirement Timing compares what each retirement date pays.
- The Income Timeline models your income after you go, including when and how hard you draw the TSP.
The Order of Operations
The standard priority order for retirement dollars, mapped to an ATC career. Start at the top; move down only when the step above is full. It assumes the groundwork is done first: high-interest debt paid off and an emergency fund in place.
Put in 5% of basic pay and the agency puts in 5%: 1% automatic, dollar-for-dollar on your first 3%, fifty cents on the dollar on the next 2% (breakdown below). It's the closest thing to free money in the system. Never leave it on the table.
Consider a High-Deductible Health Plan (HDHP). The Health Savings Account (HSA) is the only triple-tax-free account: deductible going in, grows untaxed, tax-free coming out for medical costs. And you'll have years of those between retiring and Medicare at 65.
A Roth IRA (through providers like Vanguard, Fidelity, or Schwab) offers a broader range of investments than the TSP, and qualified withdrawals in retirement are tax-free. The catch at controller pay: direct contributions start phasing out at $153,000 MAGI for single filers ($242,000 married filing jointly) in 2026; above the range, money gets in only through the extra step known as a backdoor Roth.
Then push TSP contributions toward the IRS annual elective-deferral limit ($24,500 in 2026). That builds the core of your retirement savings.
Maxed everything above? A regular brokerage account has no contribution limits and no withdrawal age, useful for covering the years between separating and your penalty-free IRA age (59½).
Contribution Limits
How much you can put into the TSP each year. From the year you turn 50, catch-up room stacks on top of the base limit. With mandatory separation at 56, those final six years are prime saving time.
IRC 402(g) employee limit (your own pre-tax + Roth contributions).
Stacks on top of the elective deferral from the year you turn 50.
SECURE 2.0 amount replacing the age-50 catch-up for ages 60–63; only reachable if you're still a federal employee then.
IRC 415(c) cap on all additions for the year: your contributions plus the agency match.
Under SECURE 2.0, if your prior-year FICA wages exceeded $150,000, your catch-up contributions must be Roth. The agency match is always Traditional (pre-tax) regardless of how you contribute.
How the Agency Match Works
The 5% match is tiered, not flat. You get the full amount only by contributing at least 5% of your basic pay.
| Your Contribution | Agency Adds | Running Agency Total |
|---|---|---|
| 0% (automatic only) | 1% automatic contribution | 1% |
| First 3% | Dollar-for-dollar (1:1) | 4% |
| Next 2% (the 4th & 5th) | 50 cents per dollar (1:0.5) | 5% |
| Above 5% | No additional match | 5% (max) |
One catch on the automatic 1%: it vests after 3 years of federal service. Leave earlier and you forfeit it (and its earnings). Your own contributions and the 4% match are always yours.
The match is paid per pay period, and the TSP has no year-end true-up. Hit the $24,500 cap in October and the matching stops for the rest of the year. That 4% is gone for good. To max without losing match, divide the limit by your 26 pay periods (about $943) and contribute evenly.
Traditional vs. Roth
Traditional (pre-tax) or Roth (after-tax) depends on your current tax rate, expected future rate, and career timeline. You can revisit it after retirement, when the low-income years before 62 open a Roth conversion window.
For ATCs: Higher earners can cut taxable income during peak earning years. In retirement, income usually drops, so withdrawals may land in a lower bracket.
For ATCs: Early-career controllers on lower pay may do better paying tax now at a lower rate. Roth also hedges against future tax-rate increases.
Inside the TSP: The Funds
The five core funds and the L lifecycle funds: what each holds and how much risk it carries.
| Fund | What is it? | Risk & Growth |
|---|---|---|
| G Fund | Govt Securities. Guaranteed not to lose principal. | Lowest risk. Returns may trail inflation over long periods. |
| F Fund | Fixed Income. Broad index of U.S. bonds. | Low–medium risk. Modest returns; used to reduce portfolio swings. |
| C Fund | Common Stock. Tracks the S&P 500 (large U.S. companies). | Higher risk. Historically strong long-term growth with big short-term swings. |
| S Fund | Small/Mid Cap. Covers the U.S. stock market outside the S&P 500. | Higher risk. Broadens U.S. stock exposure beyond the S&P 500; often paired with C. |
| I Fund | International. Companies outside the U.S. | Medium–high risk. Adds diversification beyond U.S. markets. |
| L Funds | Lifecycle Funds. Target-date funds (e.g. L2050). | Risk steps down over time. Automatically shifts from aggressive to conservative as the target date nears. |
You Can Touch Your TSP at 50, Penalty-Free
ATCs are qualified public safety employees, so the 10% early-withdrawal penalty on TSP distributions does not apply if you separate from federal service:
- In or after the year you turn age 50, or
- After completing 25 years of creditable service (any age).
This is broader than the usual age-55 "rule of 55." It applies to the TSP (and other qualified employer plans), not IRAs, and the distribution must come after you separate. For early-withdrawal mechanics and 72(t) distributions, see the Second Career page.
Pick how the money comes out, and change it whenever:
- Installment payments: monthly, quarterly, or annual. Adjust the amount, or stop, anytime.
- Single withdrawals: any amount from $1,000 up, as often as you like.
- Life annuity: trade part of the balance for a guaranteed monthly check for life. One-time and irreversible.
Spending it before 59½? Keep the money inside the TSP: rolling to an IRA forfeits the penalty exception above (the rollover trap). Pick a sustainable rate on the Income Timeline.