Last Updated on April 17, 2024 by Ben
Investing in Gold through a Thrift Savings Plan (TSP)
Investing in gold through a TSP, or Thrift Savings Plan, is one of the best ways for you to prepare yourself for retirement, and it’s easier than you might think. Investing in gold can offer many benefits, including protection against inflation while also allowing investors to take advantage of the current low prices.
What is a TSP Plan?
A Thrift Savings Plan is a type of government-sponsored retirement savings plan. It’s got some similarities with traditional 401(k) plans offered to the private sector. Still, there are also some key differences that you should know about before deciding whether or not this program suits your needs.
A thrift savings plan is a great way to save for retirement on a tax-deferred basis. If you’re a federal employee or are considering a career in government, here’s how these savings plans work.
A TSP is a retirement savings plan that all federal employees can have. If you work for the government, then you can have this plan. This is like other plans that private employers may offer for their staff.
Federal employees can save money for retirement with a TSP. Like a 401(k), your employer takes out the money and matches it.
If you are a federal employee or member of the military, you can save in a TSP account while also getting retirement benefits. If you are not covered by FERS or CSRS but are in the military, the TSP is an extra source of money for your retirement.
Benefits of Thrift Savings Plan
While there are some limitations to Thrift Savings Plan, it is a great way for federal workers and members of the military to get access to retirement savings.
Automatic Matching
The TSP is a program for both federal employees and members of the military. Federal employees are automatically enrolled unless they opt-out first. Meaning even if you don’t choose to invest in a TSP, it may still be assisting with your retirement plan. As part of their participation, 1% of federal employee income is applied toward their TSP each pay period.
Additional Guaranteed Matching
One of the benefits employees with TSPs gain is a matching contribution from their employing agency or service, anywhere from 1% to 5%, depending on many factors. This is one benefit these employees do not have in common with those who contribute to 401(k)s and similar plans through private sector work–the employer match is guaranteed.
The G Fund
One of the investment options available in the TSP is different from normal. The G Fund is made up of specific Treasuries issued by the U.S. government for this purpose.
The U.S. government guarantees this fund, so it is safe, and there is no risk of losing your money. It will also protect you from inflation, but the returns are very low. If you opened a fund before September 5th, 2015, and did not choose one, you were automatically enrolled in the G Fund.
Pre-packaged Investment Options
There are five different lifecycle funds that can be used in the TSP. You can invest in these funds to get a different mix of stocks and bonds, depending on what you want.
You have a lot of options with the TSP. You can invest in different funds. The L Funds are for people who don’t know what to do. They will tell you how much you should invest in the different types of funds, and then you don’t have to decide.
- The F Fund is a riskier way to invest than the G fund. The F Fund includes treasury agency bonds, corporate bonds, and non-corporate bonds.
- The C Fund is a way to invest in the S&P 500. This investment can have higher returns, but it also has more risk.
- The S Fund is an investment fund that invests in companies that are not in the S&P 500. You can get both stock dividends and earnings if you invest in this fund.
- The I Fund tracks the performance of the MSCI EAFE Index (Europe, Australasia, Far East). Gains in the I Fund come from stock dividends and also gains in the currency.
Immediate Vesting
Federal employees who engage in the Thrift Savings Plan (TSP) are fully vested for matching contributions — unlike with 401(k) accounts, which can require years of participation before becoming vested.
Low Administrative Fees
The TSP, with nearly $500-$600 billion in assets under management, is able to offer its participants the best deals for fees. One caveat to these low fees is that holding a relatively small amount of money means it might not be possible to add any more, or some options (such as metals) may not be available.
TSP Plan Rollover Rules & Limitations
In the federal government, you can withdraw your money from a TSP when you leave government service. You can also roll it over to an IRA or to other qualified plans. Here are some rules for TSP rollover:
- When you submit a rollover request from your TSP, it can take several weeks to process the request. Failure to follow through with your desire to withdraw within two months of submitting the paperwork will result in the funds being treated as taxable income instead of retirement savings.
- You cannot use the distribution from your TSP account as “cash” in order to make investments before establishing your individual retirement account.
- Taxes on savings from TSP rollovers are complicated, and you should speak with a tax advisor before attempting any rollover.
You can now avoid the hassle of receiving a check in the mail if you choose to perform a direct rollover with your TSP funds. You never receive any money from your account with this option and instead have it transferred into your new IRA plan without ever touching paper.
Can I Use TSP to Invest in Gold?
The Thrift Savings Plan is a private retirement plan that was formerly available to members of the federal workforce and military personnel. In 2013, TSP participants were no longer authorized to purchase gold coins or bars directly through their accounts. It may be better for these investors to buy physical gold outside of their plans as an alternative.
You can’t make individual investments into specific stocks or businesses through your TSP. Instead, you select from five preset funds. U.S. Treasurys (G Fund) make up the investment’s long-term options, and LifeCycle Funds provide greater short-term risk in return for potentially higher returns over time as selected allocations of the core.
- G Fund: government securities
- F Fund: fixed income index
- C Fund: common stock index
- S Fund: small-cap stock index fund
- I Fund: international stock index fund
Methods to Move Your TSP to Gold IRA
Rollover
In a rollover, you take the money out of your TSP and put it into one or more IRAs. You will have to mark it as a rollover rather than as a contribution. Contribution is limited to $6,000 ($7,000 if you are over 50 years old).
Also, you have to do the rollover within 60 days, or else the IRS will treat the money as a withdrawal, and you’ll have to pay taxes on it. This is because there are problems with this method, including that it can result in mistakes that trigger huge tax payments and rob you of a tax-sheltered home for your retirement savings.
Direct Method
The direct method, also called a trustee-to-trustee transfer, moves the TSP assets or cash directly to one or more IRAs. You don’t touch the money – it goes directly into the new account(s). The direct method is better because you don’t have to worry about the 60-day deadline.
You can have different IRAs. That way, you can divide your retirement funds between a conventional IRA and a Gold IRA. You decide what part of your money you want to invest in precious metals and allocate your transfers accordingly. Many experts recommend that you invest 10% of your money in gold and silver.
Conclusion
The TSP is a great way to set aside for retirement. The TSP has many different option investments, and the government matches your money up to 5%. Balancing your investment portfolio is important if you want it to meet financial goals, so make sure that there are reputable providers available like Gold IRA’s from well-known companies when looking into gold as an investment.