Thrift Savings Plan (TSP) Accounts

The Thrift Savings Plan (TSP) is the federal government's defined-contribution retirement plan, functionally equivalent to a 401(k). Stratum models TSP accounts as dedicated account types — TSP (Pre-Tax) and TSP (Roth) — that apply the same tax treatment as traditional and Roth 401(k) accounts respectively. The separate labels ensure reports correctly name federal employee accounts.

How it works

TSP accounts are display aliases for their 401(k) equivalents. Stratum applies identical tax treatment, RMD rules, contribution logic, and projection mechanics. The only difference from 401(k) / Roth 401(k) is the label shown in reports and the asset type selector. When entering TSP balances for a federal employee client, select TSP (Pre-Tax) or TSP (Roth) in the account type dropdown in the Asset Configuration modal. Do not use the generic 401(k) / Roth 401(k) types for federal employees if report labels matter to the client.

  1. 1. Select the correct TSP account type

    In the Asset Configuration modal, choose TSP (Pre-Tax) for traditional (pre-tax) TSP contributions, or TSP (Roth) for Roth TSP contributions. TSP (Pre-Tax) maps to the tax-deferred account bucket; TSP (Roth) maps to the tax-free account bucket.

    Example: Federal employee with $400,000 in traditional TSP and $80,000 in Roth TSP: enter two separate assets using TSP (Pre-Tax) and TSP (Roth) account types.

  2. 2. Tax treatment: TSP (Pre-Tax)

    Identical to a traditional 401(k). Contributions are pre-tax (or deductible). All distributions are 100% ordinary income. RMDs begin at the standard age per SECURE 2.0 (73 for those born 1951-1959; 75 for those born 1960+). Roth conversion strategies can draw from TSP (Pre-Tax) the same as from a traditional IRA or 401(k).

    TSP (Pre-Tax) Distribution = 100% ordinary income
    Example: $30,000 TSP distribution in the 22% marginal bracket = $6,600 federal tax.

  3. 3. Tax treatment: TSP (Roth)

    Identical to a Roth 401(k). Contributions are after-tax (no current deduction). Qualified distributions are tax-free and do not raise AGI. SECURE 2.0 §325 eliminated lifetime RMDs for designated Roth accounts inside employer plans (including Roth TSP and Roth 401(k)) for tax years beginning after December 31, 2023, so a Roth TSP no longer requires lifetime RMDs.

    TSP (Roth) Distribution = 100% tax-free (qualified)
    Example: $30,000 Roth TSP distribution = $0 federal income tax, $0 added to AGI.

Real-world context

TSP vs. 401(k): What Is Different?

The TSP is managed by the Federal Retirement Thrift Investment Board (FRTIB) and is available to federal civilian employees (FERS/CSRS) and uniformed service members. The contribution limits, tax treatment, and RMD rules match those of 401(k) plans. Key practical differences: TSP has very low expense ratios, limited investment options, and unique withdrawal mechanics (including an annuity option through MetLife). These differences do not affect Stratum calculations.

Roth TSP and RMDs

SECURE 2.0 §325 eliminated lifetime required minimum distributions for designated Roth accounts inside employer plans — including Roth TSP, Roth 401(k), and Roth 403(b) — for tax years beginning after December 31, 2023. A Roth TSP held in the plan now matches Roth IRA treatment for RMD purposes: no lifetime distributions are required. Death RMDs for non-spouse beneficiaries still apply. Stratum models TSP (Roth) in the tax-free bucket and applies no RMDs, so this rule is reflected automatically — no rollover-to-Roth-IRA workaround is needed solely for RMD avoidance.

FERS Full Picture

Federal employees under FERS typically have three retirement income sources: (1) the FERS basic annuity (entered as pension income with the federal-pension flag), (2) the TSP (entered as TSP Pre-Tax and/or TSP Roth assets), and (3) Social Security. Some also receive the FERS Special Retirement Supplement (SRS) before age 62. Each component requires a separate entry in Stratum.

What drives the result

Account Type (TSP Pre-Tax vs. TSP Roth)
Base Data -> Assets -> Asset Configuration Modal -> Account Type

Determines which tax bucket receives the balance: tax-deferred (TSP Pre-Tax) or tax-free (TSP Roth). Affects RMD calculation, distribution tax treatment, and Roth conversion eligibility.

$400,000 in TSP (Pre-Tax) generates RMDs starting at 73 and all distributions are ordinary income. Same amount in TSP (Roth) produces tax-free distributions.

Assumptions

  • TSP (Pre-Tax) applies the same tax-deferred account mechanics as a traditional 401(k)
  • TSP (Roth) applies the same tax-free account mechanics as a Roth 401(k)
  • Contribution limits are identical to 401(k) limits (IRS annually-adjusted)
  • RMD rules for TSP (Pre-Tax) are identical to 401(k): begin at age 73 or 75 per SECURE 2.0
  • TSP (Roth) is not subject to lifetime RMDs (SECURE 2.0 §325, effective 2024) — same as Roth IRA and Roth 401(k)

Limitations

  • TSP loan balances and outstanding 401(k) loans are not modeled
  • TSP lifecycle funds (L funds) are not distinguished from other investment options; use the global investment return assumption
  • The TSP has unique withdrawal options (monthly installments, life annuity) that differ from standard 401(k) options; Stratum models distributions the same as any tax-deferred account

Related

This page explains how Stratum models this calculation. It is educational material for financial professionals, not tax or legal advice, and tax law changes. Verify current figures against primary IRS sources before relying on them with a client.