What Is the Thrift Savings Plan?
The Thrift Savings Plan (TSP) is the federal government's defined-contribution retirement plan for active-duty military members, National Guard and Reserve service members, and federal civilian employees. It works like a 401(k) plan in the private sector. Contributions come out of your paycheck before or after taxes, and the balance grows tax-deferred (Traditional) or tax-free (Roth) until retirement.
For 2026, the TSP elective deferral limit is $24,500. That limit is independent of any IRA you may also fund. Service members age 50 and older can add a catch-up contribution of $8,000, for a total of $32,500. Those ages 60–63 qualify for an even higher catch-up of $11,250, bringing the maximum to $35,750.
If you enrolled in the military on or after January 1, 2018, you are likely under the Blended Retirement System (BRS). Under BRS, the government automatically contributes 1% of your basic pay to your TSP and matches dollar-for-dollar up to an additional 4% — a potential 5% total match. That free money makes TSP extraordinarily valuable.
TSP Fund Options
TSP offers a focused lineup of six core funds: the G Fund (government securities), F Fund (bond index), C Fund (large-cap stock index), S Fund (small-cap stock index), I Fund (international stock index), and a series of L (Lifecycle) target-date funds. These funds are low-cost — among the lowest expense ratios of any retirement vehicle in the country — but they cover only broad asset classes.
Learn more about how TSP fits into your overall military retirement picture at our Military Retirement hub.
What Is an IRA?
An Individual Retirement Account (IRA) is a personal, tax-advantaged retirement savings account that you open and manage independently of your employer. Unlike TSP, which is tied to your military or federal employment, an IRA belongs entirely to you and goes wherever your career takes you. There are two main types: Traditional IRA and Roth IRA.
Traditional IRA: Contributions may be tax-deductible depending on your income and whether you have access to a workplace retirement plan. Growth is tax-deferred. Withdrawals in retirement are taxed as ordinary income.
Roth IRA: Contributions are made with after-tax dollars. Growth is tax-free. Qualified withdrawals in retirement — including earnings — are completely tax-free. There are no required minimum distributions (RMDs) during your lifetime.
2026 IRA Contribution Limits
The 2026 IRA contribution limit is $7,000 per person, or $8,000 if you are age 50 or older. This limit applies to all your IRA accounts combined — you cannot contribute $7,000 to a Traditional IRA and another $7,000 to a Roth IRA in the same year. For Roth IRA eligibility, income phase-outs apply: $150,000–$165,000 for single filers and $236,000–$246,000 for married filing jointly in 2026.
TSP vs IRA: Side-by-Side Comparison
The table below summarizes the key differences between TSP and an IRA across the factors that matter most to military members and federal employees.
| Feature | TSP | IRA (Traditional / Roth) |
|---|---|---|
| 2026 Contribution Limit | $24,500 (under 50); $32,500 (50+); $35,750 (ages 60–63) | $7,000 (under 50); $8,000 (50+) |
| Tax Treatment Options | Both Traditional (pre-tax) and Roth (after-tax) available | Both Traditional and Roth available; Roth has income limits |
| Investment Options | 5 index funds + L Lifecycle funds (limited selection, very low cost) | Nearly unlimited — stocks, ETFs, bonds, mutual funds, REITs, and more |
| Employer / Government Match | Up to 5% of basic pay under BRS (1% automatic + 4% matching) | None |
| Loan Provisions | Yes — borrow up to 50% of vested balance or $50,000, whichever is less | No loan provision |
| Required Minimum Distributions | Yes — RMDs required starting at age 73 (Traditional and Roth TSP) | Traditional IRA: RMDs at age 73; Roth IRA: no RMDs during owner's lifetime |
| Early Withdrawal Rules | 10% penalty before age 59½ (with exceptions); separation from service at 55 may qualify | 10% penalty before 59½; Roth IRA contributions (not earnings) can be withdrawn anytime penalty-free |
| Creditor Protection | Strong federal protections under ERISA-like rules | State law varies; up to $1 million protected in bankruptcy federally |
| Available To | Active duty, National Guard/Reserve, federal civilian employees | Anyone with earned income (Roth subject to income limits) |
| Backdoor Contribution Option | No | Yes — backdoor Roth IRA available for high earners |
Can You Contribute to Both a TSP and an IRA?
Yes — you can absolutely contribute to both a TSP and an IRA in the same year, and doing so is one of the smartest retirement moves available to military members. This is a common misconception that causes many service members to leave tax-advantaged space on the table. TSP and IRA contribution limits are completely separate under IRS rules.
In 2026, a service member under age 50 can put $24,500 into TSP and another $7,000 into an IRA — a combined $31,500 in tax-advantaged retirement savings in a single year. With a Roth IRA, that $7,000 grows completely tax-free for the rest of your life.
Having both accounts also gives you retirement income flexibility. Withdrawals from a Traditional TSP are taxable. Withdrawals from a Roth IRA are tax-free. Blending both means you can manage your tax bracket in retirement by choosing which account to draw from each year.
The Combat Zone Advantage: TSP's Unique Military Benefit
Military members serving in a designated combat zone have a tax advantage with TSP that no IRA can match. Combat pay is excluded from federal income tax. When you contribute that combat pay to a Roth TSP, you receive extraordinary treatment: the contribution is never taxed — because combat pay isn't taxable income — and qualified withdrawals are also tax-free because of the Roth structure.
In practical terms, that means zero tax, ever on money you earn and invest during a combat deployment. A civilian contributing the same amount to a Roth 401(k) or Roth IRA would have already paid income tax before contributing. This benefit is unique to uniformed service members and represents one of the most powerful wealth-building opportunities available in the entire US tax code.
Additionally, combat zone contributions do not count toward the standard $24,500 elective deferral limit in the same way civilian contributions do — the IRS allows total TSP contributions (including agency/service contributions) up to the annual additions limit ($70,000 in 2026) for members receiving tax-exempt pay. This means a deployed service member can potentially shelter a much larger amount in Roth TSP than the standard limit allows.
For a deeper dive into how Roth and Traditional TSP work, visit our guide on Roth TSP vs Traditional TSP.
Which Should You Fund First?
For most military members, the order of priority for retirement savings is clear and straightforward. Follow these steps to maximize every dollar.
- Contribute at least 5% of basic pay to TSP (BRS members). The government match is an immediate, guaranteed 100% return on your first 5%. No investment in the world beats free money. If you are under BRS and not contributing at least 5%, you are leaving compensation on the table.
- Max out a Roth IRA ($7,000 in 2026) if you are under the income limit. After capturing the full match, a Roth IRA's tax-free growth and withdrawal flexibility make it the next best destination. Junior enlisted members and mid-grade officers typically fall well below the Roth IRA income phase-out.
- Return to TSP and work toward the $24,500 limit. Once the Roth IRA is funded, direct remaining investable income back to TSP to maximize the higher contribution limit.
- Taxable brokerage account if you have exceeded all tax-advantaged limits.
This sequencing assumes you are under BRS. If you are under the legacy High-3 system with no government match, prioritize Roth IRA earlier in the stack since the match incentive does not exist. You can read more about that comparison at our BRS vs High-3 explainer.
What If You Are Close to Separating?
If you are within a few years of leaving the military, a Roth IRA becomes especially attractive because it travels with you. TSP can be kept open after separation, but you lose the ability to contribute new money once you leave service unless you take federal civilian employment. A Roth IRA has no such restriction — you can keep contributing for as long as you have earned income.
Investment Options: TSP vs IRA
TSP's investment menu is intentionally simple: five broad index funds and a series of target-date Lifecycle funds. This simplicity is a feature for many investors — the expense ratios are among the lowest in any retirement plan, often below 0.05%. For passive, set-it-and-forget-it investing, TSP's lineup is hard to beat on cost.
An IRA opened at a major brokerage gives you access to essentially the entire investment universe. You can buy individual stocks, exchange-traded funds (ETFs), bond funds, real estate investment trusts (REITs), sector funds, international funds, and more. This flexibility is valuable if you want to implement a specific strategy, tilt toward small-cap value, invest in sectors like defense or healthcare, or simply choose from a broader set of low-cost index funds than TSP offers.
TSP Fund Lineup at a Glance
- G Fund: Government securities; stable value, no credit risk
- F Fund: Bond index (Bloomberg US Aggregate)
- C Fund: Large-cap US stocks (S&P 500 equivalent)
- S Fund: Small/mid-cap US stocks (Dow Jones US Completion TSM)
- I Fund: International developed-market stocks (MSCI EAFE)
- L Funds: Target-date lifecycle funds that automatically shift allocation as you approach retirement
For most military members early in their career, the TSP C Fund and S Fund combined with a Roth IRA invested in a total-market ETF is a simple, low-cost, tax-diversified foundation for long-term wealth building.
Withdrawal Rules and Flexibility
Roth IRA offers the most flexibility of any retirement account available to military members. You can withdraw your contributions (not earnings) from a Roth IRA at any time, for any reason, without taxes or penalties. This makes a Roth IRA function partly as a backup emergency fund. Earnings require you to be age 59½ and have held the account for at least five years for a qualified tax-free withdrawal.
TSP withdrawals before age 59½ generally trigger a 10% early withdrawal penalty plus income taxes on Traditional funds. However, military members who separate from service during or after the year they turn 55 can take TSP distributions without the 10% penalty under the Rule of 55. This is an earlier access window than most civilians get with a 401(k) or IRA.
TSP Loan Provision
TSP allows you to borrow from your own account — up to 50% of your vested balance or $50,000, whichever is less. Loans must be repaid with interest (paid back to yourself) and have repayment terms of 1–5 years for general-purpose loans, or up to 15 years for residential loans. Loans have risks: if you leave service before repaying, the outstanding balance may become a taxable distribution. IRAs have no loan provision at all.
Required Minimum Distributions
Both Traditional TSP and Roth TSP require you to take RMDs starting at age 73 under current law. This is a disadvantage of Roth TSP versus a Roth IRA. A Roth IRA has no RMDs during the owner's lifetime, allowing tax-free growth to continue indefinitely. If minimizing RMDs in retirement is a priority, rolling Roth TSP funds into a Roth IRA after separation can eliminate the RMD requirement. Consult a financial advisor before executing this strategy.
High Earners: Backdoor Roth IRA
High-earning military officers and senior NCOs who exceed the Roth IRA income phase-out limits still have a path to Roth benefits through the backdoor Roth IRA. The strategy involves making a non-deductible contribution to a Traditional IRA (which has no income limit) and then converting it to a Roth IRA. The conversion triggers taxes only on any pre-tax money already in Traditional IRAs, so the cleanest execution involves having no existing pre-tax IRA balances.
For 2026, single filers earning above $165,000 and married filers earning above $246,000 are completely phased out of direct Roth IRA contributions. The backdoor approach legally bypasses these limits and has been in widespread use for over a decade. The IRS has not moved to eliminate it.
If you have a large pre-tax Traditional IRA, a mega backdoor Roth strategy may be possible through after-tax TSP contributions up to the annual additions limit, but this is complex and warrants professional guidance.
Verdict: TSP vs IRA
TSP and IRA are not rivals — they are complementary tools that work best together. TSP wins on contribution limits, employer match (under BRS), loan provisions, and the unique combat zone tax benefit. IRA wins on investment flexibility, Roth withdrawal convenience, and no lifetime RMDs for Roth accounts.
The best strategy for most military members: Contribute at least 5% to TSP to capture the BRS match, then fund a Roth IRA up to $7,000, then push TSP contributions higher if additional savings capacity remains. Service members in combat zones should strongly consider directing as much combat pay as possible to Roth TSP while deployed.
Neither account alone is sufficient for a robust military retirement plan. Use both. Start as early in your career as possible. Time in the market is the most powerful factor of all.
Ready to build your complete military retirement plan? Explore our full Military Retirement hub for guides on pension, BRS, TSP investing, and transitioning to veteran financial planning.