TSP Vs. Pensions

If you work for the federal government or serve in the U.S. armed forces, you are eligible for the Thrift Savings Plan. Similar to 401k plans in the private sector, the TSP isn't a pension plan. If you work in the public sector for a state, city or non-federal agency, you probably receive a pension plan. This includes most teachers, firefighters and police officers. Although some private companies provide pensions, most now offer 401ks.

Thrift Savings Plan

The TSP is a defined contribution plan, so how much retirement money you receive depends on how much you put into the account and its accumulated earnings. It offers various funds to choose from for retirement investing. These professionally managed plans are not available to the general public and range in levels of investment risk, from conservative plans with guaranteed returns to aggressive plans with higher risk. As a federal employee or member of the military, the TSP is funded by automatic payroll deductions, and your agency also contributes money. The Federal Retirement Thrift Investment Board, an independent government agency, manages the TSP. If you were hired before July 1, 1984, and fall under the Civil Service Retirement System, you can also contribute to the TSP; however, your agency will not match contributions.


As a pension is a defined benefit plan, a public sector employee knows he will receive a designated amount of money monthly upon retirement. Public sector employees do contribute specified amounts toward pensions through payroll deductions, but taxpayers pays for the bulk of the plan. Administration of pension plans depend on the particular plan. States generally administer their own plans, with the aid of investment consultants.

Receiving Benefits

If you work for a non-federal government entity, you are probably eligible to start receiving pension payments after completing 30 years of service, or at retirement age. That age now varies between 65 and 67, depending on your birth year. With a TSP, you can begin making withdrawals after reaching the age of 59½. Since pension benefits are lifelong, recipients don't need to worry about outliving the income. That's not true of the TSP. If your investments perform badly, if you take out too much money too soon, or you live to be really old, you could run out of money from your TSP.


If you leave the military or federal service and work for a private or non-profit organization, you can roll over your TSP account into your new employer's 401k or 403b retirement plan, or into your individual retirement account. Rolling over a retirement account into another qualified retirement plan is a means to transfer and consolidate your retirement earnings without penalty. You can also roll over your 401k or 403b into a TSP, if you change jobs from the private to federal sector. Pensions from public-sector jobs can't be rolled over.

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