For many federal employees, the Thrift Savings Plan (TSP) becomes one of their largest assets — built over a career of steady contributions, employer matching, and a balance that quietly grows in the background.
But retirement changes the conversation.
Once you retire, it becomes something else entirely: a retirement income resource. And every decision from here — taxes, investments, withdrawals, ongoing management — carries real weight.
The real question isn’t just how much is in your TSP? It’s what do you do with it now? Here’s what to consider — and how to make it work for you throughout retirement.
A Refresher on TSP Contributions
Before we talk about what happens at retirement, it’s worth a quick refresher on contributions — especially if you have a few working years left and want to make the most of them.
For many federal employees nearing retirement, the final years of employment represent a valuable opportunity to increase retirement savings through catch-up contributions.
If you’re 50 or older, you may contribute additional funds above the standard employee contribution limit. Federal employees ages 60–63 may qualify for even higher catch-up contributions under the current rules.
These additional contributions may help strengthen your retirement savings during the years when many employees are earning their highest salaries. However, contribution amounts should always be evaluated within the context of your overall financial situation, retirement timeline, and income needs.
For 2026, the contribution limits for the TSP are as follows:
Employee Contributions: Up to $24,500
Catch-Up Contributions (Age 50+): $8,000 (if born in 1966–1975)
Catch-Up Contributions (Age 60–63): $11,250 (if born in 1962–1965)
Catch-Up Contributions (Age 64+): $8,000 (if born in 1961 or earlier)
Roth vs. Traditional TSP: Which Makes Sense for You?
TSP offers two tax treatment options, and understanding the difference may significantly shape your planning.
Traditional TSP: Contributions are pre-tax, reducing your taxable income now. Withdrawals in retirement are taxed as ordinary income. This can make sense if you expect to be in a lower tax bracket in retirement than you are today.
Roth TSP: Contributions are after-tax, but qualified withdrawals in retirement are tax-free — including the earnings. This may make sense if you expect tax rates to rise, want tax diversification in retirement, or anticipate a long retirement with decades of growth ahead.
In reality, a Roth may or may not make sense depending on your circumstances. Factors that may influence the decision include:
- Your current tax bracket
- Your expected tax bracket in retirement
- Other retirement income sources
- Future Required Minimum Distributions (RMDs)
- Estate planning considerations
For some federal employees, Traditional TSP contributions may provide meaningful tax savings today. For others, Roth contributions may create greater flexibility later in retirement.
The key is understanding how the choice fits into your overall retirement income strategy.
Fund Selection: Don’t Shortchange Your Long Haul
One of the most common mistakes federal employees make is shifting too conservatively when they retire. It feels safe to move everything into the G Fund or a money market option — but consider this: if you retire at 62 and live until 88, you have a 26-year retirement to fund.
A portfolio built entirely for income today may struggle to keep pace with inflation over that time frame. Growth matters — even in retirement.
A brief look at the TSP’s core fund options:
- G Fund → Government securities; low risk, low return; good for short-term needs or capital preservation
- F Fund → Fixed income index; bond market exposure; moderate risk
- C Fund → S&P 500 index; broad U.S. large-cap stock exposure; higher growth potential
- S Fund → Small/mid-cap U.S. stocks; more volatility, more long-term growth potential
- I Fund → International stocks; geographic diversification
- L Funds → Lifecycle funds that automatically adjust allocation based on target date
Navigating fund selection in retirement is less about picking a “safe” fund and more about building a thoughtful mix aligned with your income timeline and risk tolerance. A strategic review of your fund allocation may be one of the most important steps in your retirement process.
Withdrawal Options & Strategies
When you retire, the TSP offers several ways to access your money. Understanding your options — and the tradeoffs of each — can help you make informed financial decisions that support financial stability throughout retirement.
Leave Your Funds in the TSP
You are not required to begin withdrawals immediately at retirement. Leaving your balance invested maintains potential for continued growth and gives you access to the TSP’s low-cost fund options. You retain full control over your investment strategy and the timing of distributions. This can be a smart choice if you have other income sources in early retirement and want to let your TSP continue to grow.
Withdraw as a Lump Sum
You may take a partial or full lump sum withdrawal at any time after separation. This provides immediate access to your savings but may carry significant tax implications — particularly if a large withdrawal pushes you into a higher tax bracket in the year it is taken. Careful timing and tax planning matter here.
Purchase an Annuity
You may use TSP funds to purchase a fixed annuity, which offers a predictable stream of income for life. This option may appeal to those seeking a guaranteed income for their lifetime. The tradeoff is flexibility — fixed annuities typically lock in your payments and do not adjust for inflation.
Transfer to a Traditional IRA or Roth IRA
Rolling your TSP into a Traditional or Roth IRA gives you a broader range of investment options and more flexibility in how and when you take distributions. A rollover to a Roth IRA may also create tax planning opportunities — for example, strategically converting portions of traditional funds to Roth over time to manage your tax picture in retirement.
One important consideration across all options: Required Minimum Distributions (RMDs) begin at age 73 for traditional TSP balances. Planning ahead may help you manage the tax impact of those required withdrawals.
There’s no single “right” withdrawal strategy — it depends on your pension income, Social Security timing, other assets, and spending needs. This is where a personalized plan can make a meaningful difference.
Do You Want to Manage Your TSP in Retirement?
This is a question federal employees don’t always think to ask — but it’s an important one.
The TSP is a powerful, low-cost vehicle — but it is also relatively limited in investment options. Once you retire, you may have the option to roll your TSP into an IRA, which can offer broader investment choices and potentially more flexibility in withdrawal planning. Some employees prefer the simplicity of the TSP; others want more control.
Questions to ask yourself:
- Do I want access to investment options beyond the five core TSP funds?
- Do I want a financial advisor to actively manage my retirement assets?
- How important is it to consolidate accounts for simpler planning?
- Do I need flexibility to name beneficiaries or structure withdrawals in unique ways?
- Am I comfortable managing the TSP interface and planning on my own?
This checklist isn’t about finding the “right” answer — it’s about understanding your preferences, so your retirement planning reflects them.
There is no universal approach — only the one that aligns with your goals, your income needs, and how involved you want to be in managing your money throughout retirement.
Bringing It All Together
Navigating the TSP in retirement involves more moving parts than most federal employees expect. But with a clear understanding of your options — contributions, tax treatment, fund selection, withdrawals, and ongoing management — you can approach these decisions with confidence rather than uncertainty.
Your TSP doesn’t just “happen” at retirement — it responds to decisions you make. Decisions about contributions, fund selection, tax treatment, and withdrawal strategies all shape how well your TSP can support you for the long haul. A thoughtful, informed approach to these choices can mean the difference between a retirement that works and one that requires constant adjustment.
At Benchmark Financial Group, we help federal employees turn their TSP into a real retirement income plan — grounded in your FERS benefits, your options, and how the pieces fit together. If you’re within 5 years of retirement, now is the time for a strategic review.
Ready to see how your TSP fits into your retirement plan? Call David Raetz at 913-534-8256 or visit bfgkc.com to schedule your consultation.
Your federal career was built with discipline and service. Your retirement deserves the same level of strategy.
Want to learn more? Attend our free online webinar led by David Raetz on Thursday, July 23, 2026.
What To Do With Your TSP When You Retire
*Securities and Advisory Services Offered Through CreativeOne Securities, LLC Member FINRA/SIPC and an Investment Advisor. Benchmark Financial Group, LLC and CreativeOne Securities, LLC are not affiliated.
“*Annuities contain limitations including withdrawal charges, fees and a market value adjustment which may affect contract values. Annuities are products of the insurance industry; guarantees are backed by the claims-paying ability of the issuing company. Guaranteed lifetime income available through annuitization or the purchase of an optional lifetime income rider, a benefit for which an annual premium is charged.”
10975 Benson Dr., Suite 500
Overland Park, KS 66210
Corporate Woods Building 12