How to Keep Money in the Thrift Plan or Traditional IRA

by Cindy Quarters

Thrift plans and IRAs are two different kinds of retirement savings programs. The thrift plan, usually referred to as the Thrift Savings Plan or TSP, is a savings plan that is available to federal employees and military personnel. Contributions are normally made through payroll deductions. Traditional individual retirement accounts, called IRAs, may consist of employee and employer contributions or contributions from an individual. Once you have one of these accounts it is important to keep as much money as you can in the account until you retire.

1. Open either an IRA or a TSP account. In some cases you may be in a position to open both types of accounts. If you are eligible to participate in a Thrift Savings Plan, get the appropriate forms from your TSP contact person. Usually this will be either your immediate supervisor or someone in your human resources department. To open a traditional IRA, go to a bank, credit union or other financial institution that offers IRAs and open an account. Note that you can only open an IRA if you are younger than than 70-1/2 by the end of the year and you have earned taxable income.

2. Contribute as much as possible to your account. If you are able, contribute the maximum amount allowable. For the Thrift Savings Plan the limit is $16,500 per year as of publications, and for an IRA the limit is $5,000 per year, or $6,000 if you are 50 or oolder. If you can’t contribute the maximum, put in as much as you are able to.

3. Choose the best investment options offered by your plan. The TSP offers a limited number of options from which to choose. An IRA, on the other hand, gives you virtually unlimited choices, though there are some restrictions on the types of investments allowed. Other than those legal restrictions, you can choose to invest in anything you want. The better your investments, the more money you will be able to keep in your retirement account.

4. Leave your funds in place for as long as possible. Taking early distributions or borrowing money from your account will decrease the funds you have available. Money that isn’t in your account isn’t working for you.


  • Seek professional advice when deciding which investments to make to get the most out of your money. Take advantage of any employer contributions you might be eligible for to increase the funds in your account.


  • You must follow the rules for IRA investing, such as taking distributions at age 70-1/2 as required, not investing in collectibles and not over-funding your account. If you break the rules you will be penalized by being required to pay extra taxes, which decreases how much money you have.

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