Which of the following is true about the Thrift Savings Plan?

Which of the following is true about the Thrift Savings Plan?

• A. It is a mandatory retirement plan for all military personnel
• B. It is a tax-advantaged savings plan for federal employees and service members
• C. It allows withdrawals without penalties at any time
• D. It requires no contributions from participants

Answer: (B)

The Thrift Savings Plan (TSP) is indeed a tax-advantaged savings plan specifically designed for federal employees and members of the uniformed services, allowing them to save for retirement. Contributions to the TSP can be made through payroll deductions and are taken from pre-tax income, meaning they reduce taxable income for the year in which they are contributed. This tax-deferral feature is significant as it allows participants to maximize their savings potential, while also offering a range of investment options to help grow their retirement funds over time. The other options do not accurately reflect the characteristics of the TSP. It is not mandatory for all military personnel, as participation is voluntary. While there are certain circumstances under which individuals may withdraw funds from their TSP accounts, such as financial hardship or reaching retirement age, withdrawals are generally subject to penalties if made before a participant reaches a certain age. Lastly, contributions to the TSP are not optional; participants are encouraged to contribute, although there is some flexibility regarding the amount and frequency of those contributions.

The Thrift Savings Plan (TSP) is indeed a tax-advantaged savings plan specifically designed for federal employees and members of the uniformed services, allowing them to save for retirement. Contributions to the TSP can be made through payroll deductions and are taken from pre-tax income, meaning they reduce taxable income for the year in which they are contributed. This tax-deferral feature is significant as it allows participants to maximize their savings potential, while also offering a range of investment options to help grow their retirement funds over time.

The other options do not accurately reflect the characteristics of the TSP. It is not mandatory for all military personnel, as participation is voluntary. While there are certain circumstances under which individuals may withdraw funds from their TSP accounts, such as financial hardship or reaching retirement age, withdrawals are generally subject to penalties if made before a participant reaches a certain age. Lastly, contributions to the TSP are not optional; participants are encouraged to contribute, although there is some flexibility regarding the amount and frequency of those contributions.