TSP vs 401(k): Which Retirement Plan Wins?
The Thrift Savings Plan (TSP) is the federal government's retirement plan for civilian employees and uniformed service members, and it shares the same 2026 contribution limit as a 401(k) — $24,500, or $32,500 at 50+ — but wins on cost, charging roughly 0.05% in administrative fees versus a typical 401(k)'s 0.4%–1%, while offering a far narrower five-fund menu in exchange.
Thrift Savings Plan (TSP) vs 401(k): Side-by-Side
| Thrift Savings Plan (TSP) | 401(k) | |
|---|---|---|
| Who can use it | Federal civilian employees and uniformed military | Private-sector (and some nonprofit) employees |
| 2026 contribution limit | $24,500 ($32,500 if 50+; $35,750 if 60–63) | $24,500 ($32,500 if 50+; $35,750 if 60–63) — shared limit if you also have a TSP in the same year |
| Agency/employer match | FERS/BRS: automatic 1% + match up to 4% (5% total); legacy CSRS/High-3: no match | Varies by employer, commonly 3–6% of pay |
| Investment menu | 5 core index funds (G, F, C, S, I) plus lifecycle funds — that's it | Employer-chosen menu, often 15–30+ funds, sometimes a brokerage window |
| Average expense ratio | ~0.05% | ~0.4%–1%+ depending on the plan |
| Unique option | G Fund — government securities that can't lose principal, with a better yield than most stable-value funds | No direct equivalent |
| Roth option | Yes — Roth TSP | Yes, if the employer's plan offers it |
Which should you choose?
For most federal and military savers, the TSP's rock-bottom fees are hard to beat — contribute at least enough to capture your full agency or BRS match, since that's an immediate, guaranteed return. The narrow five-fund menu is a real tradeoff if you want more control over your asset allocation, but for a low-maintenance, low-cost core retirement account, the TSP is one of the best deals in American retirement savings.
A 401(k) from a later private-sector job isn't automatically worse — check its specific match and expense ratios before deciding whether to roll old TSP money over.
The G Fund has no real 401(k) equivalent
The TSP's G Fund invests in a special-issue U.S. Treasury security available only to the TSP, guaranteeing that principal can't be lost while still paying an intermediate-term Treasury yield. Most 401(k) plans that offer a "stable value fund" pay a lower yield because it's typically backed by insurance-company contracts rather than Treasury securities directly.
For savers who want a genuinely risk-free place to park money inside a tax-advantaged account, the G Fund is a meaningful advantage the TSP offers that a typical 401(k) menu simply doesn't match.
Matching formulas differ by retirement system, not just by plan
Federal employees under the Federal Employees Retirement System (FERS) or military members under the Blended Retirement System (BRS, for those who entered service in 2018 or later) get an automatic 1% agency or service contribution regardless of whether they contribute anything themselves, plus a dollar-for-dollar match on the first 3% of pay and 50 cents per dollar on the next 2% — five percent total.
Employees under the legacy Civil Service Retirement System (CSRS) or military members under the older High-3 retirement system get no TSP match at all, since their retirement security comes primarily from a defined-benefit pension instead. Check which system applies to you before assuming you're leaving a match on the table.
Fees compound more than most savers expect
A 0.4% difference in annual fees sounds small, but on a $500,000 balance over 20 years, it can cost tens of thousands of dollars in lost compounding compared with the TSP's roughly 0.05% expense ratio. This is the single biggest structural reason the TSP consistently ranks as one of the lowest-cost retirement plans available in the U.S.
If you roll TSP money into an IRA or a new employer's 401(k) after leaving federal service, run the numbers on the new plan's specific fund expense ratios first — a plan with high-fee actively managed funds can erase the TSP's cost advantage quickly.
Military TSP works the same as civilian TSP
The fund menu, contribution limits, and Roth option are identical whether you're a civilian federal employee or an active-duty service member — the only real difference is the matching formula, which depends on whether you're under BRS or the legacy retirement system. Use the military retirement calculator to project how your TSP balance combines with a military pension over a full career.
Frequently asked questions
Is the TSP better than a 401(k)?
The TSP usually wins on cost — roughly 0.05% in fees versus a typical 401(k)'s 0.4%–1%+ — but it offers only five core funds plus lifecycle options, while a 401(k) typically offers a much wider menu. Which is "better" depends on whether you value low cost or investment flexibility more.
Can federal employees have both a TSP and a 401(k)?
Yes, if you also have private-sector income in the same year, but the TSP and a 401(k) (or 403(b)) share one combined IRS elective-deferral limit — $24,500 in 2026 — not two separate limits.
What happens to my TSP if I leave federal service?
You can leave the money in the TSP, roll it into a new employer's 401(k) or 403(b), or roll it into an IRA. The TSP's low fees are a strong argument for leaving it in place if your new plan doesn't clearly beat its cost structure.
Does military TSP work the same as civilian TSP?
Yes — same fund menu, same contribution limits, same Roth option. The main difference is the matching formula, which depends on whether you're under the Blended Retirement System (BRS) or the legacy High-3 system.
What is the TSP G Fund and does a 401(k) have anything like it?
The G Fund is a special Treasury security available only through the TSP that can't lose principal while paying an intermediate-term Treasury yield. Most 401(k) stable-value funds pay less because they're typically backed by insurance contracts rather than direct Treasury securities.
Free calculators to help you decide
Sources
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