TSP Fund Options: Complete Guide to Thrift Savings Plan Investing
The Thrift Savings Plan (TSP) is one of the most valuable retirement benefits available to service members. With low fees and tax advantages, the TSP can help you build significant wealth over your military career.
2026 TSP Contribution Limits
| Elective Deferral Limit: | $23,500 |
| Catch-Up (Age 50+): | +$7,500 |
| Annual Addition Limit: | $70,000 |
Understanding TSP Fund Options
The TSP offers five individual funds and several Lifecycle (L) funds. Here’s what each fund invests in:
G Fund (Government Securities)
- Risk Level: Lowest
- Investment: U.S. Treasury securities
- Best For: Capital preservation, near retirement
- Historical Return: ~2-4% annually
F Fund (Fixed Income Index)
- Risk Level: Low to Moderate
- Investment: U.S. bond market index
- Best For: Diversification, income
- Historical Return: ~3-5% annually
C Fund (Common Stock Index)
- Risk Level: Moderate to High
- Investment: S&P 500 large-cap stocks
- Best For: Long-term growth
- Historical Return: ~10% annually
S Fund (Small Cap Stock Index)
- Risk Level: High
- Investment: Small and mid-cap U.S. stocks
- Best For: Aggressive growth
- Historical Return: ~10-11% annually
I Fund (International Stock Index)
- Risk Level: High
- Investment: International developed market stocks
- Best For: Global diversification
- Historical Return: ~7-8% annually
Lifecycle (L) Funds
L Funds automatically adjust your investment mix based on your target retirement date:
| Fund | Target Date | Stock/Bond Mix |
|---|---|---|
| L Income | Already retired | 30/70 |
| L 2030 | 2028-2032 | 50/50 |
| L 2040 | 2038-2042 | 70/30 |
| L 2050 | 2048-2052 | 85/15 |
| L 2060 | 2058-2062 | 90/10 |
| L 2065 | 2063+ | 99/1 |
Traditional vs. Roth TSP
You can contribute to TSP in two ways:
Traditional TSP
- Contributions reduce taxable income now
- Pay taxes when you withdraw
- Best if you expect lower tax bracket in retirement
Roth TSP
- Contribute after-tax dollars
- Withdrawals are tax-free
- Best if you expect higher tax bracket in retirement
Military TSP Strategy Tips
- Get the match first – Under BRS, contribute at least 5% to get the full government match
- Use combat zone exclusion – Contribute up to $70,000/year from tax-free combat pay
- Start early – Even small contributions compound significantly over 20+ years
- Consider your pension – Your military pension is like a bond, so you may invest more aggressively in TSP
- Roth for deployments – Tax-free income + Roth = double tax benefit
TSP Fees Comparison
TSP has the lowest fees of any retirement plan:
| TSP Expense Ratio | 0.055% |
| Average 401(k) Fee | 0.50-1.00% |
| Typical Mutual Fund | 0.75-1.50% |
On a $500,000 balance, TSP fees cost just $275/year compared to $2,500-$5,000 for typical mutual funds.
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